As filed April 24, 1998
File No. 70-____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM U-1
APPLICATION OR DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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New Century Energies, Inc.
Public Service Company of Colorado
NC Enterprises, Inc.
1225 17th Street
Denver, Colorado 80202-5533
(Names of companies filing this statement and
addresses of principal executive offices)
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New Century Energies, Inc.
(Name of top registered holding company parent)
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Teresa S. Madden
Controller and Secretary
New Century Energies, Inc
1225 17th Street, Suite 900
Denver, Colorado 80202-5533
(Name and address of agents for service)
The Commission is requested to send copies of all notices, orders
and communications in connection with this Application/Declaration to:
James D. Albright, Esq. William T. Baker, Jr., Esq.
William M. Dudley, Esq. Reid & Priest LLP
New Century Energies, Inc 40 West 57th Street
1225 17th Street, Suite 600 New York, New York 10019
Denver, Colorado 80202-5533
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Item 1. Description of Proposed Transaction.
1.1. Background. New Century Energies, Inc. ("NCE") is a registered
holding company under the Public Utility Holding Company Act of 1935, as amended
(the "Act"). Public Service Company of Colorado ("PSCo"), a wholly-owned
public-utility subsidiary of NCE, provides electric and retail natural gas
service primarily in the Denver and Front Range metropolitan areas. Through PSCo
and certain existing non-utility subsidiaries, NCE also engages in activities
related to the supply, transportation and storage of natural gas in Colorado and
Wyoming, including the provision of transportation services to nonassociate
utilities.1 NC Enterprises, Inc. ("Enterprises"), a wholly-owned non-utility
subsidiary of NCE, serves as an intermediate holding company for certain of
NCE's non-utility subsidiaries and investments.2
NCE, PSCo and Enterprises are now seeking authorization for various
transactions, as described below, relating to the joint development and
ownership by PSCo and Enterprises and certain nonassociated companies of gas
transportation and related facilities. In furtherance of such joint undertaking,
PSCo and Enterprises have agreed with Colorado Interstate Gas Company ("CIG"),
Wyoming Interstate Company ("WIC") and CIG Resources Company ("CIGR"), all of
which are direct or indirect subsidiaries of The Coastal Corporation, to
undertake the following transactions: (1) Enterprises and CIG Gas Supply Company
("CIGGS") will form and acquire the equity securities of and provide other
funding to WYCO Development LLC ("WYCO"), a non-utility company formed for the
purpose of facilitating the transactions described herein;3 (2) PSCo will
construct the Front Range Pipeline (as described in item 1.3.1, below) and WIC
will construct the Powder River Lateral Expansion (as described in item 1.3.2,
below) (collectively, the "Facilities"); (3) WYCO will purchase the Facilities
from PSCo and WIC upon completion of construction; and (4) WYCO will lease the
Front Range Pipeline back to PSCo and the Powder River Lateral Expansion back to
WIC under separate but substantially identical long-term lease agreements.
1.2 Acquisition of Equity Securities of WYCO. Enterprises requests
authority to acquire the equity securities of WYCO, a Colorado limited liability
company formed by Enterprises and CIGGS to facilitate the transactions described
herein. The membership interests
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1 See New Century Energies, Inc., Holding Co. Act Release No. 26748
(Aug.1, 1997), 65 SEC Docket at 278. West Gas InterState, Inc. ("WGI"), a
non-utility gas pipeline subsidiary of NCE, transports gas from the PSCo gas
system to Cheyenne Light, Fuel and Power Company, an associate company. e prime,
inc. ("e prime"), also a non-utility subsidiary of NCE, holds investments in
pipeline and underground gas storage businesses.
2 Id. at 282.
3 As described in greater detail in item 1.3, the Facilities to be
acquired and owned by WYCO will consist of interstate and intrastate pipelines,
compressors and associated equipment that will be used by PSCo and WIC to
transport gas to their respective markets and not to distribute gas at retail.
Accordingly, WYCO will not be a "gas-utility company" within the meaning of
Section 2(a)(4) of the Act.
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in WYCO will be owned 50% by Enterprises and 50% by CIGGS. The Operating
Agreement governing WYCO shall be in substantially the form of Exhibit A hereto.
Under the Operating Agreement, Enterprises and CIGGS will have equal voting
rights with respect to the management of the business of WYCO and will share
equally in all costs and revenues of WYCO, except as specifically provided
herein. WYCO shall be managed by a management committee ("Management Committee")
that will initially consist of one representative and one alternate
representative of each of the members. Decisions of the Management Committee
shall be made by the unanimous vote of the representatives of the members, with
certain exceptions.
Enterprises' total investment in WYCO is estimated not to exceed $26
million. Such investment would be in the form of Enterprises' initial capital
contribution to WYCO and subsequent cash contributions, open account advances,
or loans, or any combination thereof, to WYCO. At present, NCE proposes to
provide Enterprises with the funds needed by Enterprises to fulfill its
obligations under the Operating Agreement. NCE will derive the funds needed for
such purpose from securities issuances (including issuances of guarantees)
authorized in separate proceedings4 and from other internally-generated sources
of cash.5
1.3 Description of Facilities. PSCo and WIC have agreed to construct
the Facilities, which are generally described as follows:
1.3.1 Front Range Pipeline. PSCo shall undertake construction
of approximately 53-miles of 24-inch diameter natural gas pipeline extending
from an interconnection with PSCo's Chalk Bluffs measurement and compression
facilities, located just south of the Colorado-Wyoming border near Rockport,
Colorado, to an interconnection with PSCo's existing 24-inch pipeline adjacent
to PSCo's Fort St. Vrain gas-fired electric generating station, near
Platteville, Colorado (the "Front Range Pipeline"). The Front Range Pipeline
will be designed initially to create additional transportation capacity from the
Rockport/Chalk Bluffs interconnection to the Platteville/Fort St. Vrain
interconnection of approximately 269,000 dekatherms (Dth) per day. CIG and WIC
shall cause the construction of all necessary taps and metering facilities on
their respective pipeline systems and new CIG and WIC interconnections with PSCo
at Rockport to accommodate the full initial design capacity from either WIC's or
CIG's pipeline system. CIG and WIC shall be responsible for the design and
capital costs associated with these related facilities. In order to support and
maintain the initial design capacity of 269,000 Dth per day on the Front Range
Pipeline, CIG, WIC and PSCo shall enter into a facilities interconnection
agreement wherein WIC and CIG shall agree to provide pressures sufficient to
effect delivery into the Front Range Pipeline. PSCo shall cause the construction
of all necessary facilities on PSCo's pipeline system upstream of the Front
Range Pipeline to
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4 In this connection, the Commission has authorized the NCE system to
undertake various financings in File No. 70-9007.
5 Alternatively, as discussed below, WYCO may seek to project finance
the cost of the facilities on an initial or refinance basis. Such financing
would be done on a basis consistent with Rule 52(b).
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accommodate the initial design capacity. The estimated cost to construct the
Front Range Pipeline is approximately $25 million.
PSCo has filed an application with the Colorado Public Utilities
Commission ("CPUC") requesting a certificate of public convenience and necessity
to construct the Front Range Pipeline, as well as approval for the related
financing transactions that are described below. (See Exhibit D hereto). PSCo is
seeking authority from the CPUC to commence construction of the Front Range
Pipeline by May 23, 1998,6 so that it may complete construction and place the
Front Range Pipeline in service by November 1, 1998, in time for the 1998-1999
winter heating season. As stated in PSCo's application to the CPUC, the Front
Range Pipeline is necessary for operational reasons to alleviate capacity
constraints on its northern Front Range system. The Front Range Pipeline will
enable PSCo to expand its delivery capacity and provide it and its
transportation customers with access to several interstate pipelines that
intersect at the Chalk Bluffs "hub,"7 which, in turn, will provide PSCo and its
customers with much improved access to upstream gas supplies in production areas
and supply basins in the Rocky Mountain Region. Such improved access to upstream
gas supplies should lead to lower priced supplies of gas becoming available to
the Front Range market.
1.3.2 Powder River Lateral Expansion. WIC has agreed to
install and construct equipment and facilities designed to provide approximately
7400 nameplate horsepower of compression to be located near Laramie and
Cheyenne, Wyoming ("Phase I"), for the purpose of expanding the WIC capacity
into Powder River and expanding that portion of its existing capacity from
Laramie to Cheyenne, Wyoming. Subsequently, depending on future market
conditions, WIC may install and construct equipment and facilities designed to
supply approximately 4700 nameplate horsepower of additional compression at
Laramie and approximately 100 miles of 16-inch pipeline that would loop CIG's
existing Powder River Lateral terminating at the Laramie compressor station
("Phase II"), for the purpose of further expanding such WIC capacity (together,
the Phase I and Phase II expansions are referred to as the "Powder River Lateral
Expansion"). The planned in-service date of the Phase I expansion is November 1,
1998, and, depending on market conditions, the anticipated in-service date of
the Phase II expansion is October 1, 1999.
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6 Under the current procedural schedule in the CPUC proceeding,
the CPUC should issue its decision on PSCo's application by June 1, 1998.
7 Hubs are formed at locations where several interstate pipelines
meet, or intersect, and function as the physical transfer points between the
intersecting pipelines where shippers (i.e., buyers and sellers) and traders can
buy, sell, exchange or trade gas or pipeline capacity or other "unbundled"
services (e.g., temporary storage or parking or loaning of gas). At the Chalk
Bluffs hub, PSCo would have access to transportation (and thus upstream gas
supplies) on the CIG and WIC pipelines, as well as on the pipeline facilities of
Williams Natural Gas Company, Trailblazer Pipeline Company, KN Interstate Gas
Transmission Company and WestGas InterState, Inc.
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Phase I of the Powder River Lateral Expansion will be designed to
create additional transportation capacity on the WIC pipeline system of 49,000
Dth per day and, subject to future market conditions, Phase II would be designed
to create additional transportation capacity on the WIC pipeline system of
120,000 Dth per day between the point of interconnection of the Powder River
Lateral with the pipeline system of MIGC, Inc., an interstate pipeline
subsidiary of Western Gas Resources, Inc., and the terminus of the WIC pipeline
at the Chalk Bluffs hub. These facilities will provide PSCo and other customers
of WIC with access to additional transportation capacity into the Chalk Bluffs
hub, which, in turn, will provide improved access to upstream gas supplies. The
estimated cost to construct Phase I of the Powder River Lateral Expansion is $16
million and the estimated cost to construct Phase II, based on currently
anticipated facilities, would be $28 million.
1.4 Sale of the Facilities to WYCO. Upon the completion of
construction, PSCo proposes to sell the Front Range Pipeline to WYCO for an
amount equal to the actual total cost incurred by PSCo, as accounted for in
accordance with the "Gas Plant Instructions" of the Uniform System of Accounts,
18 C.F.R. Part 201, plus an allowance for funds used during construction
("AFUDC") that is based on a capitalized cost of money equal to the lesser of
PSCo's applicable AFUDC rate or the CPUC-authorized rate of return on rate base
during the period of time when the facilities are under construction and prior
to the time when placed in service.
Likewise, upon completion of construction of Phase I of the Powder
River Lateral Expansion, WIC will sell a 100% interest in the Phase I facilities
to WYCO, and, if market conditions justify construction of the Phase II of the
Powder River Lateral Expansion, WIC will sell an approximately 32% undivided
interest in the completed Phase II facilities to WYCO, in each case at WIC's
actual total cost. The parties intend that WYCO's investment in the Front Range
Pipeline and the Powder River Lateral Expansion facilities shall be equal. To
achieve this result, the percentage undivided interest in the Phase II
facilities to be conveyed to WYCO will be adjusted, if necessary, so that WYCO's
total investment in the Powder River Lateral Expansion facilities (i.e., Phase I
and Phase II combined) will be equal to WYCO's investment in the Front Range
Pipeline. In the event that Phase II of the Powder River Lateral Expansion is
ultimately not constructed as planned, then WYCO shall be provided an
opportunity to invest in the next expansion of the CIG or WIC pipeline systems
serving the Denver area, and any subsequent expansions, in an amount that causes
the total investment of WYCO in the WIC and CIG expansions to be equal to the
total investment of WYCO in the Front Range Pipeline facilities.
1.5 The Facilities Leases. Concurrently with the purchase from PSCo of
the Front Range Pipeline, PSCo and WYCO will enter into a facilities lease (the
"Front Range Pipeline Lease") under which WYCO will lease the Front Range
Pipeline facilities back to PSCo. Likewise, concurrently with the purchase from
WIC of the Phase I facilities of the Powder River Lateral Expansion, WIC and
WYCO will also enter into a facilities lease (the "Powder River Lateral
Expansion Lease") under which WYCO will lease such interest in the Powder River
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Lateral Expansion back to WIC. A similar lease arrangement will be entered into
between WYCO and WIC concurrently with WIC's transfer to WYCO of an undivided
interest in the Phase II facilities.
The initial term of both of the Facilities Leases will be 30 years.
Each Facilities Lease will be a "net" lease under which PSCo and WIC, as the
case may be, will be solely responsible for operations, maintenance, repair,
taxes (other than income taxes) and other costs of the leased facilities. Upon
expiration of the Facilities Leases, the Front Range Pipeline and Powder River
Lateral Expansion facilities will be sold back to PSCo and WIC, respectively, at
the net book cost. The Front Range Pipeline Lease is subject to review and
approval by the CPUC, and the Powder River Lateral Expansion Lease is subject to
review and approval by the Federal Energy Regulatory Commission ("FERC").
1.5.1 The Front Range Pipeline Lease. Under the terms of the
Front Range Pipeline Lease, lease payments will be cost-of-service based, and
will be calculated annually using rate of return on rate base, depreciation, and
income tax factors authorized by the CPUC.8 In the event that WYCO makes payment
of property taxes on the Front Range Pipeline, PSCo would be obligated to
reimburse WYCO for such amounts. PSCo shall be obligated to operate the Front
Range Pipeline in accordance with accepted industry standards and shall offer
and provide gas transportation services using such facilities in accordance with
its CPUC gas tariff. PSCo shall obtain all necessary governmental approvals
including a certificate of public convenience and necessity from the CPUC for
authorization to construct and operate the Front Range Pipeline and to provide
the additional transportation services created thereby with a proposed
in-service date of November 1, 1998.
The Front Range Pipeline Lease shall be in substantially the form of
Exhibit B-1 hereto.
1.5.2 The Powder River Lateral Expansion Lease. Under the
terms of the Powder River Lateral Expansion Lease, lease payments will be
cost-of-service based, and will be calculated annually using rate of return on
rate base, depreciation, and income tax factors authorized by the FERC. In the
event WYCO makes payment of property taxes on the Powder River Lateral Expansion
facilities, WIC will be obligated to reimburse WYCO for such amounts. WIC will
be obligated to operate the leased facilities in accordance with accepted
industry standards and shall offer and provide gas transportation services using
such facilities in accordance with its FERC gas tariff. WIC, and, to the extent
necessary, WYCO, shall obtain all necessary governmental approvals including a
certificate of public convenience and necessity from the FERC for authorization
to construct and operate the Powder River Lateral Expansion and to provide the
additional transportation services created thereby with proposed in-service
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8 Because the lease payments under the Front Range Pipeline Lease will
be based on and track the depreciation rates, rate of return on rate base,
capital structure and income tax factors used by the CPUC to develop gas service
rates for PSCo, PSCo's customers will be economically neutral to the
sale/leaseback transaction.
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date of November 1, 1998 for Phase I and a proposed in-service date of October
1, 1999 for Phase II, market conditions permitting.
The Powder River Lateral Expansion Lease shall be in substantially the
same form of Exhibit B-2 hereto.
1.6 Other Matters. WYCO has no current plan to seek third-party
financing. However, in the future, WYCO may seek to finance or refinance a
portion of the cost of the Facilities through borrowings from banks or other
institutional lenders. In the event that any such borrowings are made by WYCO,
it is anticipated that the proceeds thereof would be distributed to Enterprises
and CIGGS as a return of capital. Any such debt securities would be secured
solely by the assets of WYCO, including the rental payments under the two
Facilities Leases. The Applicants believe that the issuance of bonds, notes or
other evidence of indebtedness by WYCO for the purpose of financing its
business, as described in this Application or Declaration, and the granting of
security therefor, would be exempt from the requirements of the Act pursuant to
Rule 52(b). WYCO will report any issuance of indebtedness on Form U-6B-2.
In accordance with its existing authorization,9 New Century Services,
Inc. ("NC Services"), a service company subsidiary of NCE, may agree to provide
certain categories of administrative, management, and technical services to
WYCO, in which case NC Services and WYCO would enter into the standard NCE
system service agreement. CIG, WIC, or CIGR may also from time to time render
services to WYCO . Prior to providing any such services to WYCO, these companies
would file with the Commission a statement on Form U-13E-1.
Item 2. Fees, Commissions and Expenses.
The fees, commissions and expenses incurred or to be incurred in
connection with the transactions proposed herein are estimated at $15,000.
Item 3. Applicable Statutory Provisions.
3.1 Sections 9(a) and 10 of the Act are applicable to NCE's and
Enterprises' direct or indirect acquisition of the limited liability company
membership interests of WYCO and to WYCO's acquisition of the Facilities.
Section 12(f) of the Act and Rule 43 thereunder are deemed applicable to the
sale of the Front Range Pipeline by PSCo to WYCO. Sections 9(a), 10 and 12(f)
and Rule 43 are deemed applicable to the lease of the Front Range Pipeline by
WYCO
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9 See New Century Energies, Inc., supra n. 1, 65 SEC Docket at 282.
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to PSCo and Sections 9(a) and 10 are deemed applicable to the lease of the
Powder River Lateral Expansion facilities by WYCO to WIC.
The issuance and sale of debt securities by WYCO for the purpose of
financing its business are subject to Sections 6(a) and 7 of the Act, but are
considered exempt thereunder pursuant to Section 6(b) and Rule 52(b).
Future investments by Enterprises in WYCO in the form of loans, cash
contributions or open account advances to finance WYCO's ongoing business,
including any expansions of the Facilities, would be subject to Section 9(a) and
10 or Section 12(b) and Rule 45, as applicable, but will be exempt pursuant to
Rule 52 or Rule 45(b), as applicable.
3.1.1 Standards of Approval under Section 10. The transactions
proposed herein involve an acquisition of securities, as well as an acquisition
of an interest in an other (i.e., non-utility) business, and are therefore
subject to the approval of this Commission under Section 10. The relevant
standards for approval under Section 10 are set forth in subsections (b), (c)
and (f). In this case, the requirements of Section 10(f) will be met upon the
approval of PSCo's application to the CPUC, and there is no basis for the
Commission to make any negative findings under Section 10(b).
As applied to interests in non-utility businesses, Section 10(c)(1) of
the Act provides that the Commission shall not approve an acquisition that is
"detrimental to the carrying out of the provisions of section 11." Section
11(b)(1), in turn, directs the Commission to limit the operations of a holding
company system to a single integrated public-utility system, provided that,
subject to making certain specified findings, the Commission may permit a
registered holding company to control one or more additional public-utility
systems.10 Further, the Commission may permit the retention by a registered
holding company of an interest in any non- utility business that is "reasonably
incidental, or economically necessary or appropriate to the operations" of its
integrated system or systems. The Commission has interpreted Sections 10(c)(1)
and 11(b)(1), read together, as expressing a Congressional policy against
non-utility acquisitions that bear no functional relation to a holding company's
utility operations.11
As previously described, the Front Range Pipeline is designed to
transport gas into PSCo's service territory for ultimate consumption by end-use
customers served off of PSCo's gas distribution system, including fuel for
PSCo's electric generation facilities. Substantially all of the capacity
associated with this facility will be used to support PSCo's retail gas utility
and electric utility operations. The Powder River Lateral Expansion facilities
are also designed to
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10 In its order approving the formation of NCE, supra n. 1, the
Commission made findings under Section 11(b)(1) permitting the retention of
PSCo's gas utility business as an additional integrated system.
11 See Michigan Consolidated Gas Co., 44 S.E.C. 361, 363-65 (1070),
aff'd 444 F.2d 913 (D.C. Cir. 1971).
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provide PSCo and other customers of WIC with greater access to upstream sources
of gas supply. In the past, the Commission has held that investments in similar
kinds of fuel and fuel transportation facilities meet the standards of Section
11(b)(1).12
3.1.2 Rule 54 Analysis. The transactions proposed herein are
also subject to Section 32(h)(4) of the Act and Rule 54 thereunder. Rule 54
provides that, in determining whether to approve any transaction that does not
relate to an "exempt wholesale generator" ("EWG") or "foreign utility company"
("FUCO"), the Commission shall not consider the effect of the capitalization or
earnings of any subsidiary which is an EWG or FUCO upon the registered holding
company system if paragraphs (a), (b) and (c) of Rule 53 are satisfied.
Initially, NCE has complied or will comply with the record-keeping
requirements of Rule 53(a)(2), the limitation under Rule 53(a)(3) on the use of
the NCE system's domestic public- utility company personnel to render services
to EWGs and FUCOs, and the requirements of Rule 53(a)(4) concerning the
submission of copies of certain filings under the Act to retail regulatory
commissions. Further, none of the circumstances described in Rule 53(b) has
occurred or is continuing. Rule 53(c) is inapplicable by its terms because the
proposals contained herein do not involve the issue and sale of
securities(including any guarantees) to finance an acquisition of an EWG or
FUCO.
Rule 53(a)(1) limits a registered holding company's financing of
investments in EWGs if such holding company's "aggregate investment" in EWGs and
FUCOs exceeds 50% of its "consolidated retained earnings." NCE's "aggregate
investment" (as defined in Rule 53(a)(1)(i)) in all EWGs and FUCOs, pro forma to
include NCE's indirect investment in Yorkshire Electricity Group plc
("Yorkshire")13 and Independent Power Corporation plc ("IPC"), is currently
equal to 50.9% of NCE's "consolidated retained earnings" (as defined in Rule
53(a)(1)(ii)) for the four quarters ended December 31, 1997. At the present
time, therefore, NCE does not satisfy all of the requirements of Rule 53(a).
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12 As indicated, supra n. 1, in its order authorizing the creation of
NCE, the Commission permitted NCE to retain interests in certain non-utility
gas-related operations of WGI and e prime. See also Central and South West
Corporation, Holding Co. Act Release No. 14555 (December 28, 1961) (approving
acquisition of the stock of a gas pipeline company by a registered electric
utility holding company); and Conectiv, Inc., 66 SEC Docket 1260 (February 25,
1998) (authorizing new registered electric utility holding company to retain
interest in a gas supply and storage company as being functionally related to
holding company's secondary gas distribution system). Further, Commission orders
approving investments by registered electric utility holding companies in fuel
and fuel related activities (including fuel transportation) were cited as
precedents for including such activities among those that "energy-related
companies," as defined in Rule 58(b), may engage.
13 In a separate proceeding (File No. 70-8787), PSCo is proposing to
transfer to Enterprises all of the common stock of New Century International,
Inc. ("NCI"), a wholly-owned subsidiary of PSCo through which PSCo holds,
indirectly, a 50% interest in Yorkshire. Upon completion of such transfer,
Enterprises intends to file with the Commission a Notification of Foreign
Utility Company Status on Form U-57 on behalf of Yorkshire.
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However, even if the Commission were to take into account, on a pro
forma basis, the effect of the capitalization and earnings of EWGs and FUCOs
(including, on a pro forma basis, Yorkshire and IPC) in which NCE has invested,
it would have no basis for denying the transactions proposed herein. The
transactions proposed herein relate solely to an investment, through a
non-utility subsidiary of Enterprises, in natural gas transportation and
compression facilities that will provide additional natural gas supply and
transportation capacity needed by PSCo in connection with the conduct of its
domestic natural gas distribution and electric utility operations. All aspects
of the transactions described herein, as they relate to PSCo (including
construction of the Front Range Pipeline and the related sale/leaseback
transaction) are subject to the review of and approval by the CPUC.
Moreover, there has been no material impact on NCE's consolidated
capitalization by reason of the inclusion therein of the capitalization and
earnings of EWGs and FUCOs (including on a pro forma basis Yorkshire and IPC) in
which NCE has an interest. (See Financial Statements F-3 and F-4, showing, on a
pro forma basis, the consolidated capitalization and income of NCE). NCE
believes that the capitalization ratios and income levels are within acceptable
ranges. Finally, although NCE's consolidated earnings for the year ended
December 31, 1997, were negatively affected by its investment in Yorkshire, this
was solely as the result of the imposition by the United Kingdom of a one-time,
non-recurring, windfall tax on Yorkshire. Importantly, this tax did not affect
earnings from ongoing operations, and, therefore, would not have any negative
financial impact on earnings in future periods.
Item 4. Regulatory Approvals.
The construction of the Front Range Pipeline and the sale and leaseback
thereof by PSCo pursuant to the Front Range Pipeline Lease are subject to the
jurisdiction of the CPUC.14 No other state commission, and no federal
commission, other than the Commission, has jurisdiction over the proposed
transactions insofar as they concern any of the Applicants.15
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14 On March 9, 1998, KN Wattenberg Transmission Limited Liability
Company ("KN Wattenberg") filed a complaint with the FERC against NCE, PSCo,
Enterprises, WYCO, CIG, WIC and others alleging, among other things, that the
FERC should assert jurisdiction over the Front Range Pipeline project. KN
Wattenberg Transmission Limited Liability Company v. Public Service Company of
Colorado, et al., Docket No. CP98-271. KN Wattenberg, an affiliate of KN Energy,
Inc., has filed an application with the FERC to construct and operate a pipeline
along a similar route and in competition with the Front Range Pipeline. On April
13, 1998, NCE and PSCo, along with other named respondents, filed their answer
and motion to dismiss the complaint.
15 FERC has jurisdiction under the Natural Gas Act of 1938, as amended,
over the construction, sale and leaseback of the Powder River Lateral Expansion
by WIC, an interstate pipeline company.
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Item 5. Procedure.
The Commission is requested to publish a notice under Rule 23 with
respect to the filing of this Application or Declaration as soon as practicable.
The Applicants request that the Commission's Order be issued as soon as the
rules allow, and that there should not be a 30-day waiting period between
issuance of the Commission's order and the date on which the order is to become
effective. The Applicants hereby waive a recommended decision by a hearing
officer or any other responsible officer of the Commission and consents that the
Division of Investment Management may assist in the preparation of the
Commission's decision and/or order, unless the Division opposes the matters
proposed herein.
Item 6. Exhibits and Financial Statements.
A. - Exhibits.
A Form of Limited Liability Company Operating Agreement of
WYCO Development LLC. (to be filed by amendment).
B-1 Form of Front Range Pipeline Lease Agreement.
B-2 Form of Powder River Lateral Expansion Lease Agreement.
D-1 Application of Public Service Company of Colorado to The
Public Utilities Commission of the State of Colorado
(Docket No. 97A-622G).
D-2 Order of The Public Utilities Commission of the State of
Colorado. (To be filed by amendment).
F Opinion of Counsel. (To be filed by amendment).
H Proposed Form of Federal Register Notice.
27.A Financial Data Schedule Per-Book NCE
27.B Financial Data Schedule Pro Forma NCE (Confidential
Treatment Requested)
B. Financial Statements.
1.1 Balance Sheet of NCE and consolidated subsidiaries,
as of December 31, 1997 (incorporated by reference to
the Annual Report on Form 10-K of NCE for the fiscal
year ended December 31, 1997) (File No. 1-12927).
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1.2 Statement of Income of NCE and consolidated
subsidiaries, as of December 31, 1997 (incorporated
by reference to the Annual Report on Form 10-K of NCE
for the fiscal year ended December 31, 1997) (File
No.
1-12927).
1.3 Pro Forma Capitalization of NCE and consolidated
subsidiaries after giving effect to, among other
things, the transactions contemplated herein.
(Confidential Treatment Requested - filed pursuant to
Rule 104).
1.4 Pro Forma Income Statement of NCE and consolidated
subsidiaries after giving effect to, among other
things, the transactions contemplated herein.
(Confidential Treatment Requested - filed pursuant to
Rule 104).
2.1 Balance Sheet of PSCo and subsidiaries, consolidated,
as of December 31, 1997 (incorporated by reference to
the Annual Report on Form 10-K of PSCo for the fiscal
year ended December 31, 1997 (File No. 1-3280)).
2.2 Statement of Income of PSCo and subsidiaries,
consolidated, for the year ended December 31, 1997
(incorporated by reference to the Annual Report on
Form 10-K of PSCo for the fiscal year ended December
31, 1997 (File No. 1-3280)).
2.3 Pro Forma Capitalization of PSCo and consolidated
subsidiaries after giving effect to, among other
things, the transactions contemplated herein
(Confidential Treatment Requested - filed pursuant to
Rule 104).
2.4 Pro Forma Income Statement of PSCo and consolidated
subsidiaries after giving effect to, among other
things, the transactions contemplated herein
(Confidential Treatment Requested - filed pursuant to
Rule 104).
3.1 Balance Sheet of NC Enterprises, Inc. and
subsidiaries, consolidated, as of December 31, 1997
(incorporated by reference to the
Application/Declaration on Form U-1 in File No.
70-9193 (Exhibit 3.1)).
3.2 Statement of Income of NC Enterprises, Inc. and
subsidiaries, consolidated, as of December 31, 1997
(incorporated by reference to the Application/
Declaration on Form U-1 in File No. 70-9193
(Exhibit 3.2)).
3.3 Pro Forma Capitalization of NC Enterprises and
consolidated subsidiares after giving effect to,
among other things, the transactions contemplated
herein (Confidential Treatment Requested - filed
pursuant to Rule 104).
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3.4 Pro Forma Income Statement of NC Enterprises and
consolidated subsidiaries after giving effect to,
among other things, the transactions contemplated
herein (Confidential Treatment Requested - filed
pursuant to Rule 104).
Item 7. Information as to Environmental Effects.
None of the matters that are the subject of this Application or
Declaration involve a "major federal action" nor do they "significantly affect
the quality of the human environment" as those terms are used in section
102(2)(C) of the National Environmental Policy Act. The transaction that is the
subject of this Application or Declaration will not result in changes in the
operation of the Applicants that will have an impact on the environment. The
Applicants are not aware of any federal agency that has prepared or is preparing
an environmental impact statement with respect to the transactions that are the
subject of this Application or Declaration.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned companies have duly caused this Application
or Declaration filed herein to be signed on their behalf by the undersigned
thereunto duly authorized.
NEW CENTURY ENERGIES, INC.
PUBLIC SERVICE COMPANY OF
COLORADO
NC ENTERPRISES, INC.
By: /s/ Richard C. Kelly
Name: Richard C. Kelly
Title: Executive Vice President,
Chief Financial Officer of
New Century Energies, Inc.;
Executive Vice President of
Public Service Company of
Colorado;
Executive Vice President of
NC Enterprises
Date: April 24, 1998
14
<PAGE>
Exhibit B-1
LEASE AGREEMENT
Between
WYCO DEVELOPMENT LLC
and
PUBLIC SERVICE COMPANY OF COLORADO
Dated: _____________
<PAGE>
INDEX
Page -i-
Page No.
ARTICLE I - FRONT RANGE PIPELINE 1
ARTICLE II - TERM 1
ARTICLE III - EXPANSIONS, IMPROVEMENTS AND ADDITIONS 2
ARTICLE IV - TERMINATION 2
ARTICLE V - OPERATION AND MAINTENANCE OF FRONT RANGE PIPELINE
5.1 Operation and Maintenance By PSCo 2
5.2 Compliance With Codes And Regulations 2
5.3 Environmental Policy 3
5.4 Right Of Ingress And Egress By WYCO 3
ARTICLE VI - ACCOUNTING 3
ARTICLE VII - RENT
7.1 Rent Computation 4
7.2 Calculation of Rent for Partial Periods 5
7.3 Payment Date 5
7.4 Regulatory Changes Affecting Rent 5
ARTICLE VIII - WYC'S PROPERTY OBLIGATION 5
ARTICLE IX - WYCO'S COVENANTS 6
ARTICLE X - AD VALOREM TAXES AND OPERATIONS
10.1 Filing of Returns And Payment of Taxes As Additional Rent 6
10.2 Proration Of Taxes At Termination 6
10.3 Proof Of Payment 6
10.4 Protest Of Taxes By PSCo 6
10.5 Installment Tax Payments 6
<PAGE>
INDEX
Page -ii-
Page No.
10.6 Cooperation Regarding Tax Protests 7
10.7 Deduction By WYCO 7
ARTICLE XI - INSURANCE
11.1 Required Insurance Coverage 7
11.2 Copies Of Insurance Policies 8
ARTICLE XII - INDEMNIFICATION 8
ARTICLE XIII - DEFAULT
13.1 Default Defined 8
13.2 Remedies 9
ARTICLE XIV - FORCE MAJEURE
14.1 Force Majeure Defined 9
14.2 Effect Of Force Majeure 9
14.3 Limitations 10
ARTICLE XV - MISCELLANEOUS
15.1 Assignment 10
15.2 Notices 10
15.3 Additional Documents 10
15.4 Applicable Law 11
15.5 Regulation 11
15.6 Amendments and Modifications 11
15.7 Severability 11
15.8 Non-Applicability of Public Utilities Holding Company Act 11
15.9 Section Headings 11
15.10 Counterparts Execution 11
EXHIBIT A - Description of Property
EXHIBIT B - Estimated Rent Computation
EXHIBIT C - Actual True-Up Rent Computation
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease Agreement"), is made and entered into as of
the ___ day of ___________, 1997, by and between WYCO DEVELOPMENT LLC, a
Colorado limited liability company ("WYCO"), and PUBLIC SERVICE COMPANY OF
COLORADO, a Colorado corporation ("PSCo").
W I T N E S S E T H
WHEREAS, WYCO has acquired approximately 53 miles of 24-inch pipeline
commencing at Public Service's Chalk Bluffs Compressor Station located near
Rockport, Colorado, and extending to an interconnection with the existing
facilities of PSCo at its Fort St. Vrain electric generating station, which
pipeline shall hereinafter be referred to as the Front Range Pipeline;
WHEREAS, WYCO desires to lease the Front Range Pipeline to PSCo; and
WHEREAS, PSCo desires to lease the Front Range Pipeline from WYCO;
NOW THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto agree as follows:
ARTICLE I - FRONT RANGE PIPELINE
WYCO hereby leases to PSCo and PSCo hereby leases from WYCO
approximately 53 miles of 24-inch pipeline commencing near Rockport, Colorado
and extending to an interconnection with the existing facilities of PSCo at
the Fort St. Vrain generating station, and all related rights-of-way,
easements, licenses and permits (collectively the "Front Range Pipeline").
The Front Range Pipeline is designed and constructed to have a throughput
capacity of 269 MDth/day.
ARTICLE II - TERM
The term of this Lease Agreement ("Initial Lease Term") shall be for a
period of thirty (30) years beginning on the in-service date of the Front
Range Pipeline, unless this Lease Agreement shall be earlier terminated as
provided herein.
ARTICLE III - EXPANSIONS, IMPROVEMENTS AND ADDITIONS
Without the consent of the WYCO, PSCo shall have no right to make any
expansions, improvements and/or additions to the Front Range Pipeline.
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ARTICLE IV - TERMINATION
At the expiration of the Initial Lease Term the Front Range Pipeline
shall be sold by WYCO and purchased by PSCo at the net book value of the Front
Range Pipeline. Upon early termination of the Lease pursuant to Article XIII,
possession, operation and control of the Front Range Pipeline shall be
returned to WYCO for disposition as provided in the WYCO Development LLC
Operating Agreement.
ARTICLE V - OPERATION AND MAINTENANCE OF FRONT RANGE PIPELINE
5.1 Operation And Maintenance By PSCo. PSCo shall have complete
operational control over the Front Range Pipeline and shall preserve and
maintain, at its own expense, the Front Range Pipeline in accordance with
accepted industry standards and in a state of good working order, ordinary
wear and tear excepted, consistent with and not less than PSCo's preservation
and maintenance of its own gas pipeline facilities. PSCo shall also be
responsible for all administrative activities and expenses related to the
operation and maintenance of the Front Range Pipeline other than those
responsibilities of WYCO as described in this Agreement.
5.2 Compliance With Codes And Regulations. During the Lease Term,
PSCo shall be solely responsible for complying with all applicable laws, codes
and regulations promulgated by any regulatory authority having jurisdiction
over the Front Range Pipeline. PSCo shall further be required to receive and
respond to all inquiries by any regulatory authorities.
5.3 Environmental Policy. PSCo shall comply with its Environmental
Compliance Policy in the operation and maintenance of the Front Range
Pipeline. PSCo's Environmental Compliance Program shall be maintained and
shall include:
(a) An Environmental Compliance Policy which shall be
distributed to all employees involved or maintenance of the
Front Range Pipeline.
(b) An Environmental Compliance Video which shall be shown to
all employees involved in the operation of the Front Range
Pipeline.
(c) Implementation of the policies and procedures in PSCo's
Environmental Compliance Manual.
(d) Environmental Compliance Training of all of the employees
involved in the operation of the Front Range Pipeline.
(e) An Environmental Auditing Program to audit for environmental
compliance and to correct any problems discovered during the
audits as necessary to maintain environmental compliance.
(f) An Environmental Crisis Management Team to deal with any
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environmental violations that arise on a priority response
basis.
(g) A Personal Accountability Program which documents PSCo's
response to any failure to comply with the Environmental
Compliance Program, including employee discipline.
(h) An environmental HOTLINE which allows PSCo's employees to
anonymously report environmental concerns.
(i) The appointment by PSCo of Responsible Corporate Officers
for environmental compliance. The Responsible Corporate
Officers shall implement and comply with the Environmental
Compliance Program in the operation of the Front Range
Pipeline. PSCo shall provide an annual update of
Environmental Compliance to WYCO.
5.4 Right Of Ingress And Egress By WYCO. WYCO shall have a right of
ingress and egress to the Front Range Pipeline upon giving PSCo's designated
representative twenty-four (24) hours prior notice at reasonable hours and for
reasonable periods for the purpose of inspecting the Front Range Pipeline,
provided that WYCO shall not interfere with or impair PSCo's operation of the
Front Range Pipeline.
ARTICLE VI - ACCOUNTING
WYCO shall maintain adequate records regarding the costs of the
facilities owned by it constituting the Front Range Pipeline and shall keep
the accounts relating thereto in accordance with generally accepted accounting
principles. PSCo shall have the opportunity, upon at least 15 days prior
written notification, to examine such records and accounts and to make
excerpts therefrom.
ARTICLE VII - RENT
7.1 Rent Computation. PSCo, with WYCO's approval, will compute the
rent payable by PSCo for the Front Range Pipeline. WYCO will provide detail
to PSCo as needed to compute the estimated rent by December 1 prior to the
calendar year for which the detail is being provided. PSCo will provide WYCO
with all details necessary to support the rent computation.
(a) Estimated Rent Computation. Rent will be computed for the
appropriate calendar year or other period based on best data
available to PSCo and WYCO. If any components of the Actual
True-Up Rent Computation , as described below, are not known
or final, at the time the computation is made, the latest
data available or in effect will be used for the computation
of the estimated rent. The estimated rent computation will
be based on the formula described in Exhibit B attached
hereto and incorporated by reference ("Estimated Rent
Computation").
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(b) Actual True-Up Rent Computation. On or before March 31 of
each calendar year or ninety (90) days after the end of any
other rental period not ending at calendar year end, the
rent computation will be recomputed for the prior calendar
year based on actual data, and final factors for the prior
calendar year as available. WYCO shall provide to PSCo by
March 1 of each calendar year or ninety (90) days after the
end of any partial period the data which WYCO has accounted
for which is necessary to make this computation. WYCO shall
credit PSCo's next rent payment for any excess payments plus
interest at the FERC prescribed interest rate (18 CFR
154.501(d)) from the date of each excess payment previously
made by PSCo or refunded in cash if the Lease Term has
expired. PSCo shall pay WYCO any underpayment within 15
days after calculating the Actual True-Up Rent Computations
plus interest at the FERC prescribed interest rate. The
Actual True-Up Rent Computation will be computed based on
the formula described in Exhibit C attached hereto and
incorporated by reference ("Actual True-Up Rent
Computation"). In the event final rent components are not
available for any reason, the components used to make the
Estimated Rent Computation will be used, with final
adjustments being made within 30 days of final components
being determined.
(c) Rent Components. The rent computation for the Estimated
Rent Computation and the Actual True-Up Computation will
include the following components: (1) depreciation expense,
(2) rate of return on rate base, and (3) income tax factors
as authorized by the Colorado Public Utilities Commission
for recovery by PSCo in its rates.
7.2 Calculation of Rent for Partial Periods.,
(a) For the period commencing on the in-service date of the
Front Range Pipeline through December 31 of the calendar
year in which the in-service date occurs, rent will be
computed based on the Estimated Rent Computation, and as
revised by the Actual True-Up Rent Computation, on an annual
basis and prorated based on the number of days from the
in-service date through December 31 of that year.
(b) For any other rental period of less than twelve months, rent
will be computed based on the Estimated Rent Computation.
and as revised by the Actual True-Up Rent Computation on an
annual basis and prorated for the number of days facilities
are leased by PSCo.
(c) Beginning on January 1st of the calendar year following the
in-service date, rent will be computed on a calendar year
basis based on the Estimated Rent Computation and as revised
by the Actual True-Up Rent Computation.
7.3 Payment Date. The Rent payment will be due on or before the tenth
day of the
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<PAGE>
month following the calendar month to which such payment is applicable. Rent
shall be calculated on a calendar year basis but shall be payable to WYCO in
monthly installments based on the number of months or portions of months in the
calendar year.
7.4 Regulatory Changes Affecting Rent. The calculation of the Rent
payable hereunder shall be based on rate-making principles approved by the
Colorado Public Utilities Commission in establishing PSCo's jurisdictional
rates. If during the term hereof the Colorado Public Utilities Commission
adjusts the rate of return, depreciation, capital structure and/or income tax
factors used in setting PSCo's rates, adjustment shall be made in the rent
calculation in Section 7.1, effective as of the first day of the month
following the month in which such adjustments become effective.
ARTICLE VIII - WYCO'S PROPERTY OBLIGATION
WYCO shall preserve and maintain, throughout the term of this Lease, all
its ownership rights in and to the Front Range Pipeline to ensure the
continued use by PSCo of the Front Range Pipeline in the operation of its
pipeline system.
ARTICLE IX - WYCO'S COVENANTS
WYCO hereby covenants that if PSCo shall perform all the obligations
required to be performed by PSCo under this Lease Agreement, PSCo shall have
and enjoy the quiet and peaceable possession and use of the Front Range
Pipeline during the term of this Lease.
ARTICLE X - AD VALOREM TAXES
10.1 Filing Of Returns And Payment Of Taxes As Additional Rent. PSCo,
on behalf of WYCO, shall timely file all Ad Valorem tax returns and render and
pay (prior to delinquency) all Ad Valorem taxes presently and hereafter
enacted which are lawful obligations of WYCO, unless instructed otherwise by
WYCO and except as for the first and last calendar years of this Lease as
described in Section 10.2 below. Such tax payments shall be considered as
additional rent.
10.2 Proration Of Taxes At Termination. PSCo shall pay all of the Ad
Valorem taxes levied on the Front Range Pipeline related to the first partial
calendar year and PSCo shall pay a pro rata share (based on the number of days
PSCo leased the Front Range Pipeline in the calendar year) of the Ad Valorem
taxes levied on the Front Range Pipeline related to the last calendar year
prior to the termination of this Lease.
10.3 Proof Of Payment. PSCo shall timely furnish to WYCO, receipts of
the appropriate taxing authority or other proof satisfactory to WYCO
evidencing payment. PSCo shall timely furnish to WYCO a copy of all property
tax assessments, returns and bills for the Front Range Pipeline.
5
<PAGE>
10.4 Protest Of Taxes By PSCo. If PSCo deems any tax relating to the
Front Range Pipeline excessive or illegal, PSCo may defer payment thereof so
long as the validity or the amount thereof is contested by PSCo with diligence
and in good faith. If at any time payment of the contested tax shall become
necessary to prevent the delivery of a tax deed conveying the Front Range
Pipeline or any portion thereof because of nonpayment, PSCo shall pay the
contested tax in sufficient time to prevent the delivery of any tax deed.
10.5 Installment Tax Payments. If by law any Ad Valorem tax or special
assessment with respect to the Front Range Pipeline is payable, or, at the
option of the taxpayer, may be paid in installments, PSCo may, whether or not
interest shall accrue on the unpaid balance thereof, pay the same and any
accrued interest or any unpaid balance thereof in installments as each
installment becomes due and payable, but in any event before any fine,
penalty, interest or cost may be added thereto for nonpayment of any
installment or interest.
10.6 Cooperation Regarding Tax Protests. Any contest as to the
validity or amount of any Ad Valorem tax or special assessment for Front Range
Pipeline may be made by PSCo in the name of WYCO or PSCo, or both, as PSCo
shall determine, and WYCO agrees that it will, at PSCo's expense, cooperate
with PSCo in any such contest to such extent as PSCo may reasonably request.
It is understood, however, that WYCO shall not be subject to any liability for
the payment of any costs or expenses in connection with any proceeding brought
by PSCo, and PSCo covenants to pay and to indemnify and save harmless WYCO
from any such costs or expenses. PSCo shall be entitled to any refund of any
Ad Valorem tax or special assessment and penalties or interest thereon which
have been paid by PSCo to the taxing authority or to WYCO.
10.7 Deduction By WYCO. WYCO shall be able to continue to deduct, for
income tax purposes, all real estate taxes, personal property taxes and
special assessments on an assessment date basis. PSCo agrees to provide WYCO
with such additional information as WYCO may reasonably request to assist WYCO
in maintaining WYCO's tax deduction for these taxes on an assessment date
basis.
ARTICLE XI - INSURANCE
11.1 Required Insurance Coverage. To protect WYCO and PSCo against
liability for damage, loss or expense arising in any way from damage to the
Front Range Pipeline, or from injury or death of any person or persons,
including employees of PSCo, arising as the result of, or in connection with
or caused by PSCo's operation of the Front Range Pipeline, PSCo shall maintain
during the Lease Term, at its own expense and with reliable insurance
companies, or at PSCo's option self insurance with the following minimum
insurance coverages:
(a) Worker's Compensation Insurance in compliance with the statutes of
the state of Colorado.
(b) Employer's Liability Insurance to cover death of or injury to any
employee or
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employees, with minimum limits of $100,000 per occurrence.
(c) Automobile Comprehensive Bodily Injury and Property Damage
Liability Insurance including owned, hired, rented or nonowner
automotive equipment with a combined single limit each occurrence
of $500,000 for bodily injury and property damage.
(d) General Comprehensive Bodily Injury and Property Damage Liability
Insurance including Contractual Liability, Products and Completed
Operations, Owners and Contractor's Protective, Pollution
Liability, Broad Form Property Damage, Premises and Operations,
and deletion of "X", "C" and "U" exclusions, if applicable.
Limits shall be $500,000 combined single limit each occurrence
for bodily injury and property damage.
(e) Excess Umbrella Liability Insurance coverage in excess of the
limits and terms of (b) through (d) above with a minimum combined
single limit for Bodily Injury and Property Damage of at least
$1,000,000 per occurrence.
Insurance required in (c) through (e) above shall name WYCO as an
additional insured without limitation.
11.2 Copies Of Insurance Policies. PSCo shall upon request furnish
WYCO with copies of all insurance policies evidencing the coverages required
by Section 11. 1 above. PSCo shall also upon request provide WYCO with proof
of payment for insurance coverages required by Section 11.1 above.
ARTICLE XII - INDEMNIFICATION
PSCo and WYCO each agree to protect, defend, indemnify and hold the
other, and the other's officers, directors, shareholders, agents, servants,
representatives, and employees free and harmless from and against any and all
claims, liabilities, demands and causes of action of every kind and character
(including the amounts of judgments, penalties, interest, court costs and
legal fees incurred by the indemnified party in defense of same) on account
of personal injuries, death or damage or loss of whatsoever nature sustained
or allegedly sustained by a person or property arising from any defect, error,
omission, negligence or other failure of the indemnifying party, its agents,
servants, representatives and employees arising or resulting out of this Lease
Agreement, including claims resulting out of PSCo's operation of the Front
Range Pipeline. WYCO or PSCo, however, shall have the right, at their option,
to participate at their own expense in the defense of such suit without
relieving PSCo or WYCO of any obligation hereunder.
ARTICLE XIII - DEFAULT
13.1 Default Defined. Any one or more of the following events shall
constitute
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a Default under this Lease Agreement:
(a) PSCo's failure to pay any Rent or, other monetary obligations owed
under this Lease when the same is due, unless such failure is
cured within thirty (30) days after WYCO gives notice thereof to
PSCo; or
(b) PSCo's failure to perform or observe any covenant of this Lease
Agreement (other than a default involving the payment of money),
unless the default is cured within ninety (90) days after WYCO
gives notice thereof to PSCo.
13.2 Remedies. Upon the occurrence and continuance of a Default by
PSCo, WYCO may do one or more of the following:
(a) Perform, on behalf of and at the expense of PSCo, any covenant or
obligation of PSCo under this Lease Agreement that PSCo has failed
to perform and of which WYCO has given PSCo notice, the cost of
which performance by WYCO shall be deemed additional rent payable
by PSCo to WYCO hereunder;
(b) Terminate this Lease Agreement and the tenancy created hereby and
take possession of the Front Range Pipeline from PSCo; and/or
(c) Exercise any other legal or equitable right or remedy which it may
have.
ARTICLE XIV - FORCE MAJEURE
14.1 Force Majeure Defined. As used herein, Force Majeure shall mean
acts of God, strikes, lockouts, or other industrial disturbances; acts of a
public enemy, wars, blockades, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fires, storms, crevasses, floods, washouts, arrests
and restraints of the government, either federal or state, civil or military,
civil disturbances; shutdowns for purposes of necessary testing, repairs,
alterations, installation, relocation, or construction of equipment or
facilities, accidents and breakdowns, inability of either party hereto to
obtain necessary material, equipment, supplies, or permits or labor to perform
or comply with any obligation or condition of this Agreement, and other
causes, whether of the kind herein enumerated or otherwise, which are not
reasonably in the control of the party claiming suspension. It is understood
and agreed that the settlement of strikes or lockouts shall be entirely within
the discretion of the party having the difficulty and that the above
requirements that any Force Majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes or lockouts by acceding
to the demands of an opposing party when such course is inadvisable in the
discretion of the party having the difficulty. It is further understood and
agreed that risks of regulatory disallowance or other economic penalties shall
not constitute events of Force Majeure.
14.2 Effect of Force Majeure. If by reason of Force Majeure either
party is rendered unable, wholly or in part, to carry out its obligation under
this Agreement and if such party gives notice and reasonably full particulars
of such Force Majeure in writing to the other within a
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reasonable time after the occurrence of the cause relied on, the party giving
such notice, so far as and to the extent that such party is affected by such
Force Majeure, shall not be liable in damages during the continuance of any
inability so caused; provided such cause shall be remedied with all reasonable
dispatch.
14.3 Limitations. Any Force Majeure affecting the performance
hereunder by either party, however, shall not relieve such party of liability
in the event of concurring negligence or in the event of failure to use due
diligence to remedy the situation and to remove the cause in an adequate
manner and with all reasonable dispatch, nor shall such causes or
contingencies affecting such performance relieve either party from its
obligations to make payments as determined. hereunder.
ARTICLE XV - MISCELLANEOUS
15.1 Assignment. Neither party hereto shall assign this Lease
Agreement or any of its rights or obligations hereunder without the written
consent of the other party, except that the Lease Agreement may be assigned to
any entity acquiring title to the Front Range Pipeline and to any entity
succeeding to PSCo's operation of the local gas distribution company serving
the Denver area market.
15.2 Notices. Any notice, request, demand or statement required or
permitted to be given under this Lease Agreement must be in writing and
addressed as follows:
If to WYCO: WYCO Development LLC
---------------
---------------
Attention: -----------------
If to PSCo: Public Service Company of Colorado
1225 17th Street, Suite 900
Denver, Colorado 80202
Attention: Director, Gas Planning, Marketing & Supply
Copy to: General Counsel
Either party may from time to time designate any other address by formal
written notice to the other party.
15.3 Additional Documents. Upon reasonable request, both parties
hereto shall execute and deliver, or cause to be executed and delivered any
additional documents required to effectuate the purposes of this Lease
Agreement.
15.4 Applicable Law. This Lease Agreement will be governed by, and
construed in accordance with, the laws of the State of Colorado.
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15.5 Regulation. This Lease Agreement and the respective obligations
of the parties hereto are subject to the present and future valid laws,
orders, rules and regulations of duly constituted authorities having
jurisdiction.
15.6 Amendments and Modifications. This Lease Agreement may not be
amended or modified except by a writing signed by WYCO and PSCo.
15.7 Severability. Any provision of this Lease Agreement prohibited by
or rendered unenforceable under any applicable laws, codes, or regulations
promulgated by any regulatory authority having jurisdiction over the Front
Range Pipeline, shall, at sole option of the WYCO, not affect the remaining
portions of this Lease Agreement, which shall remain enforceable to the
fullest extent permitted by law.
15.8 Non-applicability of Public Utility Holding Company Act. This
Lease Agreement shall satisfy the requirements of 17 C.F.R. section 250.7(d)(1),
so that WYCO shall not be deemed a "gas utility company" within the meaning
of the Public Utility Holding Company Act of 1935 ("PUHCA"). In the event it
is determined by WYCO that this Lease Agreement may cause WYCO to be deemed a
"gas utility company" the parties hereto shall negotiate in good faith to
restructure the Lease Agreement to eliminate such risk.
15.9 Section Headings. Section headings are inserted for convenience
only and shall not be construed as part of this Lease Agreement.
15.10 Counterparts Execution. This Lease Agreement may be executed in
two or more counterparts each of which shall constitute a single agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Lease
Agreement as of the date first written above.
WYCO DEVELOPMENT LLC
By ______________________________________
PUBLIC SERVICE COMPANY OF COLORADO
By ______________________________________
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EXHIBIT "A"
Description of Property
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EXHIBIT B
Estimated Rent Computation
(A) Depreciation Component Amount
Estimated Gross Depreciable Plant Balance for the
Front Range Pipeline at the beginning of the
Lease Computation Period (Note 2) $_____
Times PSCo's transmission function Depreciation
Rate as reflected in
PSCo's currently effective jurisdictional
rates in effect at the beginning of the
Lease Computation Period (Note 2) x_____
Depreciation Component $_____
(B) Return Component
Estimated Rate Base for the Front Range
Pipeline at the beginning of Lease
Computation Period (Note 1) $_____
Times PSCo's Overall Return Rate as
reflected in PSCo's currently effective
jurisdictional rates (Note 2) x_____
Return Component $_____
(C) Income Tax Component
Estimated Rate Base (Note 1) for the Front
Range Pipeline at the beginning of the
Lease Computation Period $_____
Times taxable component of Pre-tax Return
Rate reflected in PSCo's currently
effective Jurisdictional rates for the
Lease Computation Period (Note 3)
x_____
Taxable Component $______
Times estimated income tax rate as
reflected in PSCo's currently effective
jurisdictional rates for the Lease
Computation Period x_____
Income Tax Component $_____
Total Rent (total of all components A
through C)
$_____
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Page 2 of 3
NOTES:
(1) Estimated Rate Base consists of the following items
as of the beginning of the Lease Computation Period:
Estimated Gross Plant Balance
of Front Range Pipeline (Note 2) $_____
Less: Estimated Depreciation $_____
Reserve Balance (Note 2) $_____
Estimated net plant $_____
Estimated Deferred Income Taxes (Note 2) $_____
Total Estimated Rate Base $_____
(2) Where:
"Overall Return Rate" shall mean the total return rate reflected in
PSCo's currently effective rates.
"Estimated Gross Plant Balance" shall mean the estimated book value,
prior to depreciation, of the Front Range Pipeline.
"Estimated Gross Depreciable Plant Balance" shall mean the estimated
book value of depreciable assets, prior to depreciation, of the Front
Range Pipeline.
"Estimated Depreciation Reserve Balance" shall mean the total
accumulated balance of depreciation at the beginning of the Lease
Computation Period based on PSCo's approved transmission function
Depreciation Rate as reflected in PSCo's jurisdictional rates.
"Estimated Deferred Income Taxes" shall mean PSCo's Federal and State
income tax rates as reflected in PSCo's currently effective
jurisdictional rates multiplied times the difference between book and
tax accounting procedures for the recognition of income and expenses.
"Depreciation Rate" shall mean PSCo's transmission function depreciation
rate as reflected in the computation of PSCo's jurisdictional rates.
"Lease Computation Period" shall mean the period of time for which the
Rent is being computed as described in Section 7.1 and 7.2 of this
Agreement.
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Page 3 of 3
(3)
Calculation of Pretax Return Rate
Overall Return Rate %______
Taxable Portion of Overall Return Rate (Note 4) %______
%______
Tax Gross-up Factor (Note 4) ______
Taxable Return on Rate Base %______
(4)
"Taxable Portion of Overall Return Rate" shall mean the ratio of
(Preferred Stock + Common Equity) to the Total Overall Return Rate.
"Tax Gross-up Factor" shall equal the formula of one over one minus the
currently effective income tax rate.
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EXHIBIT C
Actual True-Up Rent Computation
(A) Depreciation Component Amount
Gross Depreciable Plant Balance
of Front Range Pipeline at beginning
of Lease Computation Period (Note 3) $_____
Times PSCo's approved Depreciation Rate
in effect for the Lease Computation Period
(Note 3) x_____
Depreciation Component (Note 1) $_____
(B) Return Component
Actual Rate Base for the Front Range Pipeline at
the beginning of the Lease Computation
Period (Note 2) $_____
Times PSCo's Approved Overall
Return Rate during the Lease Computation
Period (Note 3) x_____
Return Component (Note 1) $_____
(C) Income Tax Component
Actual Rate Base (Note 2) for the Front Range
Pipeline at beginning of Lease Computation
Period $_____
Times taxable component of Pre-Tax Return Rate
reflected in PSCo's approved jurisdictional
rates for the Lease Computation Period (Note 4) $_____
Taxable Component $_____
Times tax rate as reflected in PSCo's approved
jurisdictional rates for the Lease Computation Period x_____
Income Tax Component (Note 1) $_____
Total Rent (total of components A through C) (Note 1) $_____
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Page 2 of 3
NOTES: (1) To the extent PSCo's jurisdictional rates are not approved
at the time this computation is completed, the factors or
amounts used for these actual computations will be the same
as those used in the Estimated Rent Computation until the
PSCo' s rates become final. At that time, actual rent will
be computed pursuant to the Lease Agreement reflecting the
factors in the finally approved rates. Adjustments shall be
payable in accordance with Section 7.1(b) of this Agreement.
(2) Computation of Actual Rate Base - Actual as of the
beginning of the Lease Computation Period:
Gross Plant Balance of Front Range Pipeline at the
beginning of the Lease Computation Period (Note 3) $_____
Less: Depreciation Reserve Balance (Note 3) $_____
Actual net plant $_____
Deferred Income Taxes (Note 3) $_____
Total Actual Rate Base $_____
(3) Where:
"Overall Return Rate" shall mean the total return rate
reflected in PSCo's rates.
"Gross Plant Balance" shall mean the book value, prior to
depreciation, of the Front Range Pipeline.
"Gross Depreciable Plant Balance" shall mean the book value
of depreciable assets, prior to depreciation of the Front
Range Pipeline.
"Depreciation Reserve Balance" shall mean the total previous
accumulated balance of depreciation at the beginning of the
Lease Computation based on PSCo's approved transmission
function Depreciation Rates or PSCo's currently effective
transmission function Depreciation Rate as reflected in
PSCo's jurisdictional rates.
"Deferred Income Taxes" shall mean PSCo's Federal and State
income tax rates as reflected in PSCo's currently effective
jurisdictional rates, multiplied times the difference
between book and tax accounting procedures for the
recognition of income and expenses.
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Page 3 of 3
"Lease Computation Period" shall mean the period of time for
which the Rent is being computed as described in Section
7'.1 and 7.2 of this Agreement.
"Depreciation Rate" shall mean PSCo's approved transmission
function depreciation rate as used in the computation of
PSCo's approved jurisdictional rate.
(4)
Calculation of Pretax Return Rate
Overall Return Rate %______
Taxable Portion of Overall Return Rate (Note 5) %______
%______
Tax Gross-up Factor (Note 5) ______
Taxable Return on Rate Base %______
(5)
"Taxable Portion of Overall Return Rate" shall mean the ratio of
(Preferred Stock + Common Equity) to the Total Overall Return Rate.
"Tax Gross-up Factor" shall equal the formula of one over one minus the
currently effective income tax rate.
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Exhibit B-2
FACILITIES LEASE AGREEMENT
Between
WYCO DEVELOPMENT LLC
and
WYOMING INTERSTATE COMPANY, LTD.
Dated: ________, 1998
<PAGE>
INDEX
Page -i-
Page No.
ARTICLE I - COMPRESSION FACILITIES LEASE....................................1
ARTICLE II - TERM...........................................................1
ARTICLE III - TERMINATION...................................................1
ARTICLE IV - OPERATION AND MAINTENANCE OF COMPRESSION FACILITIES
4.1 Operation and Maintenance By WIC.............................2
4.2 Compliance With Codes And Regulations........................2
4.3 Environmental Policy.........................................3
4.3 Right Of Ingress And Egress By WYCO..........................3
ARTICLE V - ACCOUNTING......................................................3
ARTICLE VI - RENT
6.1 Rent Computation...............................................3
6.2 Calculation of Rent for Partial Periods........................4
6.3 Payment Date...................................................4
6.4 Regulatory Changes Affecting Rent..............................4
ARTICLE VII - WYCO'S PROPERTY OBLIGATION....................................5
ARTICLE VIII - WYCO'S COVENANTS.............................................5
ARTICLE IX - AD VALOREM TAXES AND OPERATIONS
9.1 Filing of Returns And Payment of Taxes As Additional Rent.....5
9.2 Proration Of Taxes At Termination.............................5
9.3 Proof Of Payment..............................................5
9.4 Protest Of Taxes By WIC.......................................5
9.5 Installment Tax Payments......................................6
<PAGE>
INDEX
Page -ii-
Page No.
9.6 Cooperation Regarding Tax Protests............................6
9.7 Deduction By WYCO.............................................6
ARTICLE X - INSURANCE
10.1 Required Insurance Coverage...................................6
10.2 Copies Of Insurance Policies..................................7
ARTICLE XI - INDEMNIFICATION................................................7
ARTICLE XII - DEFAULT
12.1 Default Defined...............................................7
12.2 Remedies......................................................8
ARTICLE XIII - FORCE MAJEURE
13.1 Force Majeure Defined.......................................8
13.2 Effect Of Force Majeure.....................................8
13.3 Limitations.................................................9
ARTICLE XIV - MISCELLANEOUS
14.1 Assignment..................................................9
14.2 Notices.....................................................9
14.3 Additional Documents........................................9
14.4 Applicable Law..............................................9
14.5 Regulation..................................................9
14.6 Amendments and Modifications................................9
14.7 Severability...............................................10
14.8 Section Headings...........................................10
14.9 Counterparts Execution.....................................10
EXHIBIT A - Description of Compression Facilities
EXHIBIT B - Estimated Rent Computation
EXHIBIT C - Actual True-Up Rent Computation
<PAGE>
FACILITIES LEASE AGREEMENT
THIS FACILITIES LEASE AGREEMENT ("Lease Agreement "), is made and
entered into as of the ___ day of __________, 1998, by and between WYCO
DEVELOPMENT LLC, a Colorado limited liability company ("WYCO"), and WYOMING
INTERSTATE COMPANY, LTD. a Colorado limited partnership ("WIC").
W I T N E S S E T H
WHEREAS, WYCO proposes to acquire approximately 7400 nameplate
horsepower of compression which has been installed at the WIC compressor
stations at Laramie and Cheyenne for the purpose of expanding the capacity of
the WIC pipeline into Powder River and expanding that portion of WIC's existing
capacity from Laramie to Cheyenne. Such compression, and appurtenant facilities,
shall hereinafter be referred to as "Compresion Facilities"; and
WHEREAS, WYCO desires to lease the Compression Facilities to WIC; and
WHEREAS, WIC desires to lease the Compression Facilities from WYCO.
NOW THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:
ARTICLE I - COMPRESSION FACILITIES LEASE
Effective upon the effective date of this Lease Agreement, WYCO shall
lease to WIC and WIC shall lease from WYCO the Compression Facilities.
ARTICLE II - TERM
The term of this Lease Agreement ("Initial Lease Term") shall be for a
period of thirty (30) years beginning on the effective date of this Lease
Agreement, unless this Facilities Lease shall be earlier terminated as provided
herein. The effective date of this Lease Agreement shall be the closing date of
the sale of the Compression Facilities by WIC to WYCO.
ARTICLE III - TERMINATION
At the expiration of the Initial Lease Term, the Compression Facilities
shall be sold by WYCO and purchased by WIC at the net book value of the
Compression Facilities. Upon early termination of the Lease Agreement pursuant
to Article XIII, possession, operation and control of the
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Compression Facilities shall be returned to WYCO for disposition as provided in
the WYCO Development LLC Operating Agreement.
ARTICLE IV
OPERATION AND MAINTENANCE OF COMPRESSION FACILITIES
4.1 Operation And Maintenance By WIC. WIC shall have complete
operational control over the Compression Facilities and shall preserve and
maintain, at its own expense, the Compression Facilities in accordance with
accepted industry standards and in a state of good working order, ordinary wear
and tear excepted, consistent with and not less than WIC's preservation of its
own gas gas pipeline facilities. WIC shall also be responsible for all
administrative activities and expenses related to the operation and maintenance
of the Compression Facilities other than those responsibilities of WYCO as
described in this Agreement.
4.2 Compliance With Codes And Regulations. During the Lease Term, WIC
shall be solely responsible for complying with all applicable laws, codes and
regulations promulgated by any regulatory authority having jurisdiction over the
Compression Facilities. WIC shall further be required to receive and respond to
all inquiries by any regulatory authorities.
4.3 Environmental Policy. WIC shall comply with its Environmental
Compliance Policy in the operation and maintenance of the CompressionFacilities.
WIC's Environmental Compliance Program shall be maintained and shall include:
(a) An Environmental Compliance Policy which shall be
distributed to all employees involved or maintenance
of the Compression Facilities.
(b) An Environmental Compliance Video which shall be
shown to all employees involved in the operation of
the Compression Facilities.
(c) Implementation of the policies and procedures in
WIC's Environmental Compliance Manual.
(d) Environmental Compliance Training of all of the
employees involved in the operation of the
Compression Facilities.
(e) An Environmental Auditing Program to audit for
environmental compliance and to correct any problems
discovered during the audits as necessary to maintain
environmental compliance.
(f) An Environmental Crisis Management Team to deal with
any environmental violations that arise on a priority
response basis.
(g) A Personal Accountability Program which documents
WIC's response to any
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failure to comply with the Environmental Compliance
Program, including employee discipline.
(h) An environmental HOTLINE which allows WIC's employees
to anonymously report environmental concerns.
(i) The appointment by WIC of Responsible Corporate
Officers for environmental compliance. The
Responsible Corporate Officers shall implement and
comply with the Environmental Compliance Program in
the operation of the Compression Facilities. WIC
shall provide an annual update of Environmental
Compliance to WYCO.
4.4 Right Of Ingress And Egress By WYCO. WYCO shall have a right of
ingress and egress to the Compression Facilities upon giving WIC's designated
representative twenty-four (24) hours prior notice at reasonable hours and for
reasonable periods for the purpose of inspecting the Compression Facilities,
provided that WYCO shall not interfere with or impair WIC's operation of the
Compression Facilities .
ARTICLE V - ACCOUNTING
WYCO shall maintain adequate records regarding the cost of the
facilities owned by it constituting the Compression Facilities and shall keep
the accounts relating thereto in accordance with generally accepted accounting
principles. WIC shall have the opportunity, upon at least 15 days prior written
notification, to examine such records and accounts and to make excerpts
therefrom.
ARTICLE VI - RENT
6.1 Rent Computation. WIC, with WYCO's approval, will compute the rent
payable by WIC for the Compression Facilities. WYCO will provide detail to WIC
as needed to compute the estimated rent by December 1st prior to the calendar
year for which the detail is being provided. WIC will provide WYCO with all
details necessary to support the rent computation.
(a) Estimated Rent Computation. Rent will be computed for the
appropriate calendar year or other period based on best
data available to WIC and WYCO. If any components of the
Actual True-Up Rent Computation, as described below, are
not known or final, at the time the computation is made,
the latest data available or in effect will be used for
the computation of the estimated rent. The estimated rent
computation will be based on the formula described in
Exhibit B attached hereto and incorporated by reference
("Estimated Rent Computation").
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(b) Actual True-Up Rent Computation. On or before March 31 of
each calendar year or ninety (90) days after the end of
any other rental period not ending at calendar year end,
the rent computation will be recomputed for the prior
calendar year based on actual data, and final factors for
the prior calendar year as available. WYCO shall provide
to WIC by March 1 of each calendar year or ninety (90)
days after the end of any partial period the data which
WYCO has accounted for which is necessary to make this
computation. WYCO shall credit WIC's next rent payment
for any excess payments plus interest at the FERC
prescribed interest rate (18 CFR 154.501(d)) from the
date of each excess payment previously made by WIC or
refunded in cash if the Lease Term has expired. WIC shall
pay WYCO any underpayment plus interest at the FERC
prescribed interest rate within 15 days after calculating
the Actual True-Up Rent Computations. The Actual True-Up
Rent Computation will be computed based on the formula
described in Exhibit C attached hereto and incorporated
by reference ("Actual True-Up Rent Computation"). In the
event final rent components are not available for any
reason, the components used to make the Estimated Rent
Computation will be used, with final adjustments being
made within 30 days of final components being determined.
(c) Rent Components. The rent computation for the
Estimated Rent Computation and the Actual True-Up
Computation will include the following components:
(1) depreciation expense, (2) rate of return on rate
base, and (3) income tax factors as authorized by the
Federal Energy Regulatory Commission for recovery by
WIC in its rates.
6.2 Calculation of Rent for Partial Periods.
(a) For the period commencing on the in service date of
the Compression Facilities through the end of the
calendar year in which the in service date occurs,
rent will be computed based on the Estimated Rent
Computation, and as revised by the Actual True-Up
Rent Computation, on an annual basis and prorated
based on, the number of days from the in service date
until the end of the year.
(b) For any other rental period of less than twelve
months, rent will be computed based on the Estimated
Rent Computation. and as revised by the Actual True-
Up Rent Computation on an annual basis and prorated
for the number of days facilities are leased by WIC.
(c) Beginning on January 1st of the year following the
year in which the in service date occurs, rent will
be computed on a calendar year basis based on the
Estimated Rent Computation and as revised by the
Actual True-Up Rent Computation.
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6.3 Payment Date. The Rent payment will be due on or before the tenth
day of the month following the calendar month to which such payment is
applicable. Rent shall be calculated on a calendar year basis but shall be
payable to WYCO in monthly installments based on the number of months or
portions of months in the calendar year.
6.4 Regulatory Changes Affecting Rent. The calculation of the Rent
payable hereunder shall be based on rate-making principles approved by the
Federal Energy Regulatory Commission in establishing WIC's jurisdictional rates.
If during the term hereof, FERC adjusts the rate of return, depreciation,
capital structure and/or income tax factors used in setting WIC's rates,
adjustment shall be made in the rent calculation in Section 6.1, effective as of
the first day of the month following the month in which such adjustments become
effective.
ARTICLE VII - WYCO'S PROPERTY OBLIGATION
WYCO shall preserve and maintain, throughout the term of this Lease,
all its ownership rights in and to the Compression Facilities to ensure the
continued use by WIC of the Compression Facilities in the operation of its
pipeline system.
ARTICLE VIII - WYCO'S COVENANTS
WYCO hereby covenants that if WIC shall perform all the obligations
required to be performed by WIC under this Facilities Lease, WIC shall have and
enjoy the quiet and peaceable possession and use of the Compression Facilities
during the term of this Lease.
ARTICLE IX - AD VALOREM TAXES AND OPERATIONS
9.1 Filing Of Returns And Payment Of Taxes As Additional Rent. WIC, on
behalf of WYCO, shall timely file all Ad Valorem tax returns and render and pay
(prior to delinquency) all Ad Valorem taxes presently and hereafter enacted
which are lawful obligations of WYCO, unless instructed otherwise by WYCO and
except as for the first and last calendar years of this Lease as described in
Section 9.2 below. Such tax payments shall be considered as additional rent.
9.2 Proration Of Taxes At Termination. WIC shall pay all of the Ad
Valorem taxes levied on the Compression Facilities related to the first partial
calendar year and WIC shall pay a pro rata share (based on the number of days
WIC leased the Compression Facilities in the calendar year) of the last calendar
year prior to the termination of this Lease.
9.3 Proof Of Payment. WIC shall timely furnish to WYCO receipts of the
appropriate taxing authority or other proof satisfactory to WYCO evidencing
payment. WIC shall timely furnish to WYCO a copy of all property tax
assessments, returns and bills for the Compression Facilities.
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<PAGE>
9.4 Protest Of Taxes By WIC. If WIC deems any tax relating to the
Compression Facilities excessive or illegal, WIC may defer payment thereof so
long as the validity or the amount thereof is contested by WIC with diligence
and in good faith. If at any time payment of the contested tax shall become
necessary to prevent the delivery of a tax deed conveying the Compression
Facilities or any portion thereof because of nonpayment, WIC shall pay the
contested tax in sufficient time to prevent the delivery of any tax deed.
9.5 Installment Tax Payments. If by law any Ad Valorem tax or special
assessment with respect to the Compression Facilities is payable, or, at the
option of the taxpayer, may be paid in installments, WIC may, whether or not
interest shall accrue on the unpaid balance thereof, pay the same and any
accrued interest or any unpaid balance thereof in installments as each
installment becomes due and payable, but in any event before any fine, penalty,
interest or cost may be added thereto for nonpayment of any installment or
interest.
9.6 Cooperation Regarding Tax Protests. Any contest as to the validity
or amount of any Ad Valorem tax or special assessment for Compression Facilities
may be made by WIC in the name of WYCO or WIC, or both, as WIC shall determine,
and WYCO agrees that it will, at WIC's expense, cooperate with WIC in any such
contest to such extent as WIC may reasonably request. It is understood, however,
that WYCO shall not be subject to any liability for the payment of any costs or
expenses in connection with any proceeding brought by WIC, and WIC covenants to
pay and to indemnify and save harmless WYCO from any such costs or expenses. WIC
shall be entitled to any refund of any Ad Valorem tax or special assessment and
penalties or interest thereon which have been paid by WIC to the taxing
authority or to WYCO.
9.7 Deduction By WYCO. WYCO shall be able to continue to deduct, for
income tax purposes, all real estate taxes, personal property taxes and special
assessments on an assessment date basis. WIC agrees to provide WYCO with such
additional information as WYCO may reasonably request to assist WYCO in
maintaining WYCO's tax deduction for these taxes on an assessment date basis.
ARTICLE X - INSURANCE
10.1 Required Insurance Coverage. To protect WYCO and WIC against
liability for damage, loss or expense arising in any way from damage to the
Compression Facilities , or from injury or death of any person or persons,
arising as the result of, or in connection with or caused by operation of the
Compression Facilities, WIC shall require that its Operator shall maintain
during the Lease Term, at its own expense and with reliable insurance companies,
or at the option of WIC's Operator, self insurance with the following minimum
insurance coverages:
(a) Worker's Compensation Insurance in compliance with the
statutes of the state of Colorado.
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(b) Employer's Liability Insurance to cover death of or
injury to any employee or employees, with minimum
limits of $100,000 per occurrence.
(c) Automobile Comprehensive Bodily Injury and Property
Damage Liability Insurance including owned, hired,
rented or nonowner automotive equipment with a
combined single limit each occurrence of $500,000 for
bodily injury and property damage.
(d) General Comprehensive Bodily Injury and Property
Damage Liability Insurance including Contractual
Liability, Products and Completed Operations, Owners
and Contractor's Protective, Pollution Liability,
Broad Form Property Damage, Premises and Operations,
and deletion of "X", "C" and "U" exclusions, if
applicable. Limits shall be $500,000 combined single
limit each occurrence for bodily injury and property
damage.
(e) Excess Umbrella Liability Insurance coverage in
excess of the limits and terms of (b) through (d)
above with a minimum combined single limit for Bodily
Injury and Property Damage of at least $1,000,000 per
occurrence.
Insurance required in (c) through (e) above shall name WYCO as an
additional insured without limitation.
10.2 Copies Of Insurance Policies. WIC shall upon request furnish WYCO
with copies of all insurance policies evidencing the coverages required by
Section 10. 1 above. WIC shall also upon request provide WYCO with proof of
payment for insurance coverages required by Section 10.1 above.
ARTICLE XI - INDEMNIFICATION
WIC and WYCO each agree to protect, defend, indemnify and hold each
other, and each other's members, agents, representatives, and employees free and
harmless from and against any and all claims, liabilities, demands and causes of
action of every kind and character (including the amounts of judgments,
penalties, interest, court costs and legal fees incurred by the indemnified
party in defense of same) on account of personal injuries, death or damage or
loss of whatsoever nature sustained or allegedly sustained by a person or
property arising from any defect, error, omission, negligence or other failure
of the indemnifying party to this Facilities Lease, its agents, servants,
representatives and employees arising or resulting out of this Facilities Lease,
including claims resulting out of WIC's operation of the Compression Facilities.
WYCO or WIC, however, shall have the right, at their option, to participate at
their own expense in the defense of such suit without relieving WIC or WYCO of
any obligation hereunder.
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ARTICLE XII - DEFAULT
12.1 Default Defined. Any one or more of the following events shall
constitute a Default under this Facilities Lease:
(a) WIC's failure to pay any Rent or, other monetary
obligations owed under this Lease when the same is
due, unless such failure is cured within thirty (30)
days after WYCO gives notice thereof to WIC; or
(b) WIC's failure to perform or observe any covenant of
this Facilities Lease (other than a default involving
the payment of money), unless the default is cured
within ninety (90) days after WYCO gives notice
thereof to WIC.
12.2 Remedies. Upon the occurrence and continuance of a Default by WIC,
WYCO may do one or more of the following:
(a) Perform, on behalf of and at the expense of WIC, any
covenant or obligation of WIC under this Facilities
Lease that WIC has failed to perform and of which
WYCO has given WIC notice, the cost of which
performance by WYCO shall be deemed additional rent
payable by WIC to WYCO hereunder;
(b) Terminate this Facilities Lease and the tenancy
created hereby, and take possession of the interest
in the Compression Facilities from WIC; and/or
(c) Exercise any other legal or equitable right or remedy
which it may have.
ARTICLE XIII - FORCE MAJEURE
13.1 Force Majeure Defined. As used herein, Force Majeure shall mean
acts of God, strikes, lockouts, or other industrial disturbances, acts of a
public enemy, wars, blockades, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fires, storms, crevasses, floods, washouts, arrests and
restraints of the government, either federal or state, civil or military, civil
disturbances, shutdowns for purposes of necessary testing, repairs, alterations,
installation, relocation, or construction of equipment or facilities; accidents
and breakdowns, inability of either party hereto to obtain necessary material,
equipment, supplies, or permits or labor to perform or comply with any
obligation or condition of this Agreement; and other causes, whether of the kind
herein enumerated or otherwise, which are not reasonably in the control of the
party claiming suspension. It is understood and agreed that the settlement of
strikes or lockouts shall be entirely within the discretion of the party having
the difficulty and that the above requirements that any Force Majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of an opposing party when such
course is inadvisable in the discretion of the party having the difficulty. It
is further understood and agreed that risks of regulatory disallowance or other
economic penalties shall not
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constitute events of Force Majeure.
13.2 Effect of Force Majeure. If by reason of Force Majeure either
party is rendered unable, wholly or in part, to carry out its obligation under
this Agreement and if such party gives notice and reasonably full particulars of
such Force Majeure in writing to the other within a reasonable time after the
occurrence of the cause relied on, the party giving such notice, so far as and
to the extent that such party is affected by such Force Majeure, shall not be
liable in damages during the continuance of any inability so caused; provided
such cause shall be remedied with all reasonable dispatch.
13.3 Limitations. Any Force Majeure affecting the performance hereunder
by either party, however, shall not relieve such party of liability in the event
of concurring negligence or in the event of failure to use due diligence to
remedy the situation and to remove the cause in an adequate manner and with all
reasonable dispatch, nor shall such causes or contingencies affecting such
performance relieve either party from its obligations to make payments as
determined. hereunder.
ARTICLE XIV - MISCELLANEOUS
14.1 Assignment. Neither party hereto shall assign this Facilities
Lease or any of its rights or obligations hereunder without the written consent
of the other party, except that the Lease Agreement may be assigned to any
entity acquiring title to the Compression Facilities and to any entity
succeeding to WIC's operation of the gas pieline facilities.
14.2 Notices. Any notice, request, demand or statement required or
permitted to be given under this Facilities Lease must be in writing and
addressed as follows:
If to WYCO: WYCO Development LLC
P.O. Box 1087
Colorado Springs, Colorado 80944
Attention: Vice President, CIG Gas Supply Company
If to WIC: Wyoming Interstate Company, Ltd.
c/o CIG Gas Supply Company
P.O. Box 1087
Colorado Springs, Colorado 80944
Attention: Senior Vice President
Either party may from time to time designate any other address by formal written
notice to the other party.
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14.3 Additional Documents. Upon reasonable request, both parties hereto
shall execute and deliver, or cause to be executed and delivered any additional
documents required to effectuate the purposes of this Facilities Lease.
14.4 Applicable Law. This Facilities Lease will be governed by, and
construed in accordance with, the laws of the State of Colorado.
14.5 Regulation. This Facilities Lease and the respective obligations
of the parties hereto are subject to the present and future valid laws, orders,
rules and regulations of duly constituted authorities having jurisdiction.
14.6 Amendments and Modifications. This Facilities Lease may not be
amended or modified except by a writing signed by WYCO and WIC.
14.7 Severability. Any provision of this Facilities Lease prohibited by
or rendered unenforceable under any applicable laws, codes, or regulations
promulgated by any regulatory authority having jurisdiction over the Compression
Facilities, shall, at sole option of the WYCO, not affect the remaining portions
of this Facilities Lease, which shall remain enforceable to the fullest extent
permitted by law.
14.8 Section Headings. Section headings are inserted for convenience
only and shall not be construed as part of this Facilities Lease.
14.9 Counterparts Execution. This Facilities Lease may be executed in
two or more counterparts each of which shall constitute a single agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Facilities
Lease as of the date first written above.
WYCO DEVELOPMENT LLC
By ______________________________________
WYOMING INTERSTATE COMPANY, LTD.
By ______________________________________
Donald J. Zinko
Senior Vice President
CIG Gas Supply Company
(General Partner)
10
<PAGE>
EXHIBIT "A"
Description of Compression Facilities
<PAGE>
EXHIBIT B
Estimated Rent Computation
(A) Depreciation Component Amount
Estimated Gross Depreciable Plant Balance for the
Compression Facilities at the beginning of the
Lease Computation Period (Note 2) $
-----
Times WIC's transmission function Depreciation Rate
as reflected in WIC's currently effective
jurisdictional rates in effect at the beginning
of the Lease Computation Period (Note 2) x
-----
Depreciation Component $
=====
(B) Return Component
Estimated Rate Base for the Compression Facilities
at the beginning of Lease Computation Period
(Note 1) $
-----
Times WIC's Overall Return Rate as reflected in WIC's
currently effective jurisdictional rates (Note 2) x
-----
Return Component $
=====
(C) Income Tax Component
Estimated Rate Base for the Compression Facilities
at the beginning of the Lease Computation
Period (Note 1) $
-----
Times taxable component of Overall Return Rate
reflected in WIC's currently effective Juris-
dictional rates for the Lease Computation Period x
-----
Taxable Component $
=====
Times estimated income tax rate as reflected in
WIC's currently effective jurisdictional rates
for the Lease Computation Period x
-----
Income Tax Component $
=====
Total Rent (total of all components A through C) $
=====
<PAGE>
Page 2 of 3
NOTES:
(1) Estimated Rate Base consists of the following
items as of the beginning of the Lease
Computation Period:
Estimated Gross Plant Balance
of Front Range Pipeline (Note 2) $
-----
Less: Estimated Depreciation
Reserve Balance (Note 2) -----
Estimated Net Plant $
-----
Estimated Deferred Income Taxes (Note 2)
-----
Total Estimated Rate Base $
=====
(2) Where:
"Overall Return Rate" shall mean the total return rate reflected in
WIC' s currently effective rates.
"Estimated Gross Plant Balance" shall mean the estimated book value,
prior to depreciation, of the Compression Facilities .
"Estimated Gross Depreciable Plant Balance" shall mean the estimated
book value of depreciable assets, prior to depreciation, of the
Compression Facilities .
"Estimated Depreciation Reserve Balance" shall mean the total
accumulated balance of depreciation at the beginning of the Lease
Computation Period based on WIC's approved transmission function
Depreciation Rate as reflected in WIC's jurisdictional rates.
"Estimated Deferred Income Taxes" shall mean WIC's Federal and State
income tax rates as reflected in WIC's currently effective
jurisdictional rates multiplied times the difference between book and
tax accounting procedures for the recognition of income and expenses.
"Depreciation Rate" shall mean WIC's transmission function depreciation
rate as reflected in the computation of WIC's jurisdictional rates.
"Lease Computation Period" shall mean the period of time for which the
Rent is being computed as described in Section 6.1 and 6.2 of this
Agreement.
<PAGE>
EXHIBIT C
Actual True-Up Rent Computation
(A) Depreciation Component Amount
---------------------- ------
Gross Depreciable Plant Balance
of Compression Facilities at beginning
of Lease Computation Period (Note 3) $
-----
Times WIC's approved Transmission Function
Depreciation Rate in effect for the Lease
Computation Period (Note 3) x
-----
Depreciation Component (Note 1) $
=====
(B) Return Component
----------------
Actual Rate Base for the Compression Facilities
at the beginning of the Lease Computation
Period (Note 2) $
-----
Times WIC's Approved Overall
Return Rate during the Lease Computation
Period (Note 3) x
-----
Return Component (Note 1) $
=====
(C) Income Tax Component
--------------------
Actual Rate Base for the Front Range
Pipeline at beginning of Lease Computation
Period (Note 2) $
-----
Times taxable component of Overall Return Rate
reflected in WIC's approved jurisdictional
rates for the Lease Computation Period (Note 1)
-----
Taxable Component $
-----
Times tax rate as reflected in WIC's approved
jurisdictional rates for the Lease
Computation Period x
-----
Income Tax Component (Note 1) $
=====
Total Rent (total of components A through C) (Note 1) $
=====
<PAGE>
Page 2 of 3
NOTES:
(1) To the extent WIC's jurisdictional rates are not approved at
the time this computation is completed, the factors or amounts
used for these actual computations will be the same as those
used in the Estimated Rent Computation until the WIC' s rates
become final. At that time, actual rent will be computed
pursuant to the Facilities Lease reflecting the factors in the
finally approved rates. Adjustments shall be payable in
accordance with Section 7.1(b) of this Agreement.
(2) Computation of Actual Rate Base - Actual as of the beginning
of the Lease Computation Period:
Gross Plant Balance of Compression Facilities
at the beginning of the Lease Computation
Period (Note 3) $
-----
Less: Depreciation Reserve Balance (Note 3) -----
Actual Net Plant $
-----
Deferred Income Taxes (Note 3) -----
Total Actual Rate Base $
=====
(3) Where:
"Overall Return Rate" shall mean the total return rate
reflected in WIC's rates.
"Gross Plant Balance" shall mean the book value, prior to
depreciation, of the Compression Facilities .
"Gross Depreciable Plant Balance" shall mean the book value of
depreciable assets, prior to depreciation of the Compression
Facilities .
"Depreciation Reserve Balance" shall mean the total previous
accumulated balance of depreciation at the beginning of the
Lease Computation Period based on WIC's approved transmission
function Depreciation Rates or WIC's currently effective
transmission function Depreciation Rate as reflected in WIC's
jurisdictional rates.
"Deferred Income Taxes" shall mean WIC's Federal and State
income tax rates as reflected in WIC's currently effective
jurisdictional rates, multiplied times the difference between
book and tax accounting procedures for the recognition of
income and expenses.
"Lease Computation Period" shall mean the period of time for
which the Rent is being computed as described in Section 6.1
and 6.2 of this Agreement.
"Depreciation Rate" shall mean WIC's approved transmission
function depreciation rate as used in the computation of WIC's
approved jurisdictional rate.
<PAGE>
Exhibit D-1
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF COLORADO
* * * * *
APPLICATION OF PUBLIC SERVICE COMPANY )
OF COLORADO FOR (1) A CERTIFICATE OF )
PUBLIC CON-VENIENCE AND NECESSITY TO )
CONSTRUCT AND OPERATE A 53-MILE LONG, )
24-INCH DIAMETER NATURAL GAS PIPELINE )
AND APPURTENANT FACILITIES FROM ITS )
EXISTING CHALK BLUFFS STATION NEAR )
ROCKPORT, COLORADO TO AN )
INTERCONNECTION WITH ITS EXIS-TING )
24-INCH PIPELINE LOCATED ADJACENT TO )
THE FORT ST. VRAIN POWER PLANT NEAR )
PLATTEVILLE, COLORADO; )
(2) AUTHORIZATION TO SELL SUCH ) DOCKET NO. 97A - ____G
FACILITIES, ONCE CONSTRUCTED, TO WYCO )
DEVELOP-MENT LLC AND TO IMMEDIATELY )
LEASE SUCH FACILITIES BACK UNDER A )
LONG-TERM LEASE; (3) A DECLARATORY )
RULING THAT WYCO DEVELOPMENT LLC WILL )
NOT BE A PUBLIC UTILITY; AND (4) SUCH )
OTHER AND FURTHER RELIEF AS THE )
COMMISSION MAY DEEM NECESSARY. )
)
)
)
)
- ----------------------------------------------------------------------
APPLICATION
- ----------------------------------------------------------------------
Pursuant to Sections 40-3-101(2) and 40-5-101, C.R.S., and Rule 55 of the
Commission's Rules of Practice and Procedure, Public Service Company of Colorado
("Public Service" or "Company"), by and through its undersigned attorney, hereby
respectfully requests an Order from the Commission granting Public Service a
Certificate of Public Convenience and Necessity ("CPCN") authorizing it to
construct and operate an approximately 53-mile-long,
<PAGE>
24-inch diameter natural gas pipeline and appurtenant facilities proposed to be
located along the northern Colorado Front Range (hereinafter referred to as the
"Front Range Pipeline"), as more fully described herein. Public Service further
requests pursuant to sections 40-5-105, C.R.S., and Rule 55 of the Commission's
Rules of Practice and Procedure, that the Commission authorize the transfer of
the Front Range Pipeline upon the completion of construction through a sale and
lease back arrangement with WYCO Development LLC ("WYCO Development"), a
Colorado limited liability company owned 50 percent by an affiliate of Public
Service and 50 percent by an affiliate of Colorado Interstate Gas Company
("CIG"). Specifically, Public Service requests authorization to sell the Front
Range Pipeline to WYCO Development and immediately thereupon to lease the Front
Range Pipeline back from WYCO Development pursuant to a 30-year lease.
Public Service requests that the Commission issue the relief sought herein
without formal hearing in accordance with sections 40-6-109(5), C.R.S., and Rule
24 of the Commission's Rules of Practice and Procedure. Public Service further
requests, if the Commission determines that a hearing is required, that the
matter of this Application be heard in the first instance by the Commission and
that the Commission issue a final order in this proceeding on or before May 22,
1998, in order to permit sufficient time for the Front Range Pipeline to be
constructed and placed in service by November 1, 1998, in time for the 1998-1999
winter heating season. In support of this Application and to facilitate such
requested expedited treatment, Public Service is submitting its direct testimony
and exhibits along with this Application. Direct testimony by the following
witnesses is being submitted on behalf of Public Service: Mr. Kurt Haeger, Gas
Planning and Supply Manager, Ms. Susan Arigoni, Director, Gas Planning,
Marketing and Supply, and Mr. Fredric C. Stoffel, Director, Electric Retail and
Gas Services.
As grounds for this Application, Public Service states as follows:
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<PAGE>
1. Name and Address of Applicant.
Public Service Company of Colorado
1225 17th Street
Denver, CO 80202-5533
Public Service is a Colorado corporation in good standing. A copy of Public
Service's Restated Articles of Incorporation is on file with the Commission.
2. Public Service Representatives. The names, addresses and telephone
numbers of Public Service's representatives upon whom all notices, pleadings,
correspondence, and other documents regarding this Application should be served
are as follows:
Fredric C. Stoffel
Director, Electric Retail and Gas Services
New Century Services, Inc.
1225 17th Street, Suite 1000
Denver, CO 80202-5533
Telephone: (303) 294-2013
James D. Albright
Associate General Counsel
New Century Services, Inc.
1225 17th Street, Suite 600
Denver, CO 80202-5533
Telephone: (303) 294-2753
3. Agent for Service of Process.
Paul J. Bonavia
Senior Vice President and General Counsel
Public Service Company of Colorado
1225 17th Street, Suite 900
Denver, CO 80202-5533
4. Description of Public Service. Public Service is an operating public
utility engaged, inter alia, in the purchase, distribution, sale and
transportation of natural gas in the State of Colorado. Public Service is a
public utility as defined in sections 40-1-103, C.R.S., and is subject to the
jurisdiction of The Public Utilities Commission of the State of Colorado.
-3-
<PAGE>
Public Service is a wholly-owned subsidiary of New Century Energies, Inc., which
is a registered public utility holding company under the federal Public Utility
Holding Company Act. The names and positions of the officers of Public Service
and its directors are included herein as Exhibit A.
5. Existing Gas Service Areas and Operations. Public Service provides
natural gas sales and transportation service throughout various portions of the
State of Colorado, including areas in and along the Front Range from Fort
Collins to Pueblo, in the Mountain Area from Grand Lake to Vail and continuing
south to the Durango/Bayfield area, and in Western Colorado from Grand Junction
north to Steamboat Springs and east to Vail. As related to this Application,
Public Service provides natural gas distribution service in and around the
greater Denver metropolitan area, from communities such as Highlands Ranch and
Parker, to the south, and communities such as Boulder, Longmont and Fort
Collins, to the north. Public Service also provides transportation and backup
sales service to Greeley Gas Company, a division of Atmos Energy Corporation
("Greeley Gas") in and around portions of Weld County, Colorado. The gas
supplies used to serve these and other communities are received into Public
Service's delivery system (i) primarily from various interconnections with CIG,
such as the Ault, Greeley, Fort Lupton, East Denver and Whispering Pines town
border stations, (ii) directly from Colorado producing fields in the
Denver-Julesburg Basin ("DJ Basin") at the tailgate of several gas processing
plants located northeast of Denver, and (iii) from a host of interstate natural
gas pipelines whose facilities intersect at and around Public Service's Chalk
Bluffs compression and measurement facilities ("Chalk Bluffs Station"), located
just south of the Colorado-Wyoming state line near Rockport, Colorado. Due to
the confluence of pipelines located at or near the Chalk Bluffs Station, Public
Service and its transportation customers have potential access at this point to
Colorado Interstate Gas Company ("CIG"), Wyoming Interstate Company, Ltd.
("WIC"), Williams Natural Gas Company ("Williams"), Trailblazer Pipeline Company
("Trailblazer"),
-4-
<PAGE>
KN Interstate Gas Transmission Company ("KNI") and WestGas InterState, Inc.
("WGI"). A map of Public Service's existing service areas and facilities along
the Front Range of Colorado, and the location of the proposed Front Range
Pipeline in relation thereto, is attached hereto as Exhibit B.
6. Certificate of Public Convenience and Necessity and Orders Requested.
Complete descriptions of the CPCN and the other orders, authorizations and
approvals sought by Public Service herein are as follows:
(a) Public Service requests an Order from the Commission issuing a
CPCN authorizing Public Service to construct and operate as an integral part of
its local distribution system approximately 53 miles of 24-inch diameter natural
gas pipeline and appurtenant facilities, referred to herein as the Front Range
Pipeline. The Front Range Pipeline will extend from Public Service's Chalk
Bluffs Station located in Section 5, Township 12 North, Range 66 West, Weld
County, Colorado, south to Public Service's existing 24-inch diameter pipeline
located at the Fort St. Vrain valve set in Section 15, Township 3 North, Range
76 West, Weld County Colorado. From the Chalk Bluffs Station, the proposed
pipeline will be routed south in the center-to-western half of Range 66 West for
approximately 35 miles until the line is just north and west of the City of
Greeley. The pipeline will then be routed slightly to the west and south,
passing out of Range 66 West and into Range 67 West in the south half of
Township 5 North. The pipeline will then be routed just east of the Town of
Milliken and west of the Town of Windsor, passing to the west of the Fort St.
Vrain Power Plant until the pipeline terminates at the existing Fort St. Vrain
valve set. The pipeline will also interconnect with Public Service's existing
Ault, Fossil Creek and Mead pipelines. The proposed construction will include
all necessary metering, controlling, treating and other equipment and facilities
necessary to tie the Front Range Pipeline into Public Service's existing system
and to safely integrate it into Public Service's gas utility operations. Public
-5-
<PAGE>
Service anticipates the total cost of construction will be approximately
$25,107,000. An estimate of the cost of the Front Range Pipeline is attached as
Exhibit C.
(b) Public Service also requests an Order from the Commission
authorizing the transfer of the Front Range Pipeline, upon completion of
construction, by sale from Public Service to WYCO Development and the subsequent
immediate transfer of the Front Range Pipeline by lease from WYCO Development
back to Public Service. Section 40-5-105, C.R.S. requires Commission
authorization of any transfer of a public utility asset by sale, assignment or
lease, other than in the ordinary course of business. A copy of the Purchase and
Sale Agreement is attached hereto as Exhibit D and a copy of the Lease Agreement
is attached hereto as Exhibit E.
(1) WYCO Development is a Colorado limited liability company
which was recently formed as a part of an alliance between Public Service and
CIG to participate jointly in the prospective development of pipeline projects
necessary to provide additional capacity to serve new market growth in the
Colorado Front Range. WYCO Development is owned 50 percent by NC Enterprises,
Inc., a wholly-owned subsidiary of New Century Energies, Inc. and an affiliate
of Public Service, and 50 percent by CIG Gas Supply Company, an affiliate of
CIG. The alliance between Public Service and CIG is discussed more fully in the
direct testimony of Public Service witness Susan Arigoni, attached hereto. Under
the terms of the alliance, and provided that all necessary regulatory approvals
of the sale and leaseback transactions are obtained from this Commission, the
Federal Energy Regulatory Commission and the Securities and Exchange Commission,
Public Service's affiliate and CIG's affiliate will each own a 50 percent
membership interest in WYCO Development, which will be the title holder of the
investment in the Front Range Pipeline and other proposed pipeline projects.
(2) The purchase price to be paid by WYCO Development to
Public Service for the Front Range Pipeline will be based on the actual total
cost incurred by Public
-6-
<PAGE>
Service to construct the Front Range Pipeline, as accounted for in accordance
with the Gas Plant Instructions of the Uniform System of Accounts, 18 C.F.R.
Part 201, plus an allowance for funds used during construction. In connection
therewith, Public Service requests that the Commission's Order provide that the
investment made by Public Service in the Front Range Pipeline be accounted for
and maintained in the Company's construction work in progress account, such
construction work in progress to have capitalized cost of money added to it on a
monthly basis in an amount equal to Public Service's then authorized rate of
return on rate base during the period of time when the pipeline is under
construction and prior to the time that the pipeline is placed into service.
(3) The initial term of the lease is 30 years. After the term
expires, the Front Range Pipeline will be sold to Public Service at its net book
value. Under the lease, Public Service will have the same possessory and
operational rights and duties that it would have if it owned the Front Range
Pipeline outright. Public Service will be responsible for all of the operation,
maintenance and repair of the facilities. The lease payments will be based upon
and will track the depreciation rates, rate of return on rate base, capital
structure, and income tax factors used to develop Public Service's
Commission-authorized gas service rates and will be structured so as not to
exceed the cost of service effect that Public Service would have realized had
the Front Range Pipeline always been included in rate base. Thus, the
sale/leaseback arrangement is designed to have absolutely no adverse customer
impacts. In fact, Public Service's customers will be economically neutral to
this arrangement.
(c) In addition to approval of the proposed sale/leaseback
transactions, Public Service requests that the Commission declare in its Order
that WYCO Development will not be a public utility under sections 40-1-103(1),
C.R.S., by virtue of its ownership interest in the Front Range Pipeline. Under
the proposed agreements and transactions covering the Front Range Pipeline, WYCO
Development is merely a holder of an investment in a public utility asset, and
is akin to a financial institution or other mortgage holder. Inasmuch as the
-7-
<PAGE>
construction, operation, custody and control of the Front Range Pipeline will
remain in Public Service, a natural gas public utility over which the Commission
has full and continuing regulatory jurisdiction, there is no basis upon which to
assert jurisdiction over WYCO Development. Public Service will construct the
Front Range Pipeline and own it during construction. Public Service will operate
and maintain the pipeline along with its other local distribution system
facilities over which the Commission has jurisdiction. And finally, Public
Service will provide Commission-jurisdictional gas sales and transportation
services utilizing the Front Range Pipeline pursuant to its Colorado PUC No.
6-Gas Tariff.
(1) The Commission has previously disclaimed jurisdiction over
entities holding title to public utility facilities in similar circumstances. In
Decision No. C95-520, the Commission issued its "Decision Granting Petition for
Declaratory Relief," wherein it declared that Walden Capital Leasing Corporation
("WCLC"), a non-profit corporation which was created by the Town of Walden, a
statutory municipality, to finance the construction of a natural gas pipeline
and the transfer of certain gas distribution facilities from Rocky Mountain
Natural Gas Division of KN Energy, Inc. was not a public utility. In disclaiming
jurisdiction over WCLC, the Commission found as follows:
Although WCLC will hold contract and legal title to the distribution
system and interconnecting pipeline, the petition points out that it
will do so only as a financing agent for Walden. Walden itself will
operate and maintain the public utility facilities, and will be the
entity providing service to the public.
. . . We agree with the petition that WCLC as
the "passive investor" holding bare legal title to
the subject assets should not be found to be a public
utility subject to our authority.1
Like WCLC, WYCO Development will merely be a "passive investor," "holding bare
legal title" to the Front Range Pipeline. Unlike that case, however, where the
operating utility was
- -----------------
1 Decision No. C95-520 at p. 5P.P. 7-8 (emphasis in original).
-8-
<PAGE>
a municipality exempt from the Commission's jurisdiction, the Commission here
will retain the full extent of its jurisdiction over the operating public
utility even if it disclaims jurisdiction over the nominal title holder.
(2) In a similar case in Decision No. C91-1729, the Commission
approved the transfer of numerous electric generating and transmission assets
formerly owned by Colorado-Ute Electric Association, Inc., through its trustee
in bankruptcy, to Public Service, Tri-State Generation and Transmission
Association, Inc. ("Tri-State"), and Pacificorp Electric Operations, Inc.
("Pacificorp"). While the Commission already had regulatory jurisdiction over
Public Service and Tri-State before the transfer, it did not previously regulate
Pacificorp. The Commission found that simple ownership in the public utility
assets, without more, did not invoke Commission jurisdiction over Pacificorp:
"Pacificorp does not propose to serve any customers in the state of Colorado by
generating, transmitting or distributing electricity to them. Under such
circumstances, Pacificorp is not a public utility within the meaning of section
40-1-103(2)(a), C.R.S. (1984 Repl. Vol.)."2 Accordingly, the Commission should
disclaim jurisdiction over WYCO Development in its Order approving the proposed
sale/leaseback transactions.
(d) Public Service seeks authority to commence construction by May
23, 1998, so that it may complete construction of the Front Range Pipeline and
place it into service by November 1, 1998, in time for the 1998-1999 winter
heating season. The pipeline needs to be completed and in service on or before
November 1, 1998 so that sales customers of Public Service, as well as its
transportation customers, may make gas supply arrangements for the winter season
which realize the numerous benefits from the additional system flexibility
created by the Front Range Pipeline. The Company anticipates that construction
of the Front Range Pipeline will require approximately five to six months from
the date of Commission authorization. A Commission Order issued any later than
May 22, 1998 will
- -----------------
2 Decision No. C91-1729 at p. 7, P. 7.
-9-
<PAGE>
provide a significant degree of uncertainty for both Public Service and its
transportation customers when entering into supply and transportation contracts
with producers and upstream transportation providers to meet their 1998-1999
winter energy needs. Consequently, Public Service respectfully requests that the
Commission issue an Order granting the above-requested approvals no later than
May 22, 1998.
(e) In addition, Public Service asks for such other and further
Orders as may be necessary or desirable in order to permit Public Service to
construct the Front Range Pipeline and place it in service by November 1, 1998.
7. Type of Utility Service to be Rendered. Public Service, upon receipt of
a Commission Order approving the requests herein, will operate the pipeline as
part of its integrated local distribution system, and as such, will use the
pipeline to receive gas into its distribution system from various interstate
pipelines for system supply and on behalf of its transportation customers. In
addition, Public Service anticipates using the Front Range Pipeline to
transport, through backhaul or displacement, gas which is received from the DJ
Basin and other points for delivery into interstate pipelines at the Chalk
Bluffs Station and destined to off-system markets. Such transportation will be
performed pursuant to a limited-jurisdiction certificate issued by the FERC in
Docket No. CP92-633,3 authorizing Public Service, as a Hinshaw pipeline, to
engage in transportation in interstate commerce in the same way and to the same
extent as intrastate pipelines pursuant to secton 311(a) of the Natural Gas
Policy Act of 1978.
8. Financial Statements. In accordance with Rule 55(c) (5), attached
hereto as Exhibit F are the Balance Sheet, Income Statement, and Statement of
Retained earnings of Public Service Company of Colorado as of September 30,
1997.
9. Proposed Tariff or Rates. Public Service is not requesting any rate
adjustments or proposing any special rate or tariff for this project at this
time. The Company
- -------------------
3 Public Service Co. of Colorado, 61 FERCP. 62,1012 (1992).
------------------------------
-10-
<PAGE>
will include the annual lease costs of the Front Range Pipeline with its overall
natural gas distribution system costs that are allocated to all customers in its
next gas rate case. As Public Service has done with similar facilities and CPCN
requests, Public Service is deferring other cost allocation and rate design
issues to the Company's next general rate proceeding before the Commission. The
estimated impact of inclusion of the Front Range Pipeline lease costs on Public
Service's customers is detailed in the attached Exhibit G.
10. Other Public Utilities. Applicant is aware that other public utilities
are currently operating near the proposed pipeline; however, Applicant is not
aware of other state-regulated utilities that will be providing similar service
as that proposed by Applicant, i.e., high pressure pipeline service, with
interconnections to and from various interstate pipelines and interconnections
with Public Service's current distribution system. Applicant is aware of the
pipeline proposal of KN Wattenberg Transmission Limited Liability Company ("KN
Wattenberg"), currently pending before the Federal Energy Regulatory Commission
("FERC") in Docket No. CP98-49, in which this Commission has filed its own
motion to intervene.
11. Public Convenience and Necessity Requirements. The public convenience
and necessity require the construction and operation of the proposed Front Range
Pipeline by Public Service for the following reasons:
(a) As explained in detail in the direct testimony of Public Service
witness Haeger, the Front Range Pipeline is the natural final leg of the
numerous gas system projects undertaken by Public Service under its long-term
facility plan and will provide much-needed delivery capacity and supply access
to the Colorado Front Range market commencing in the 1998-1999 winter season and
well into the next century. The Front Range Pipeline will provide additional
supply access and operational benefits to Public Service's sales and
transportation customers, while relieving a transportation bottleneck between
major interstate
-11-
<PAGE>
pipelines at the Chalk Bluffs Hub and Public Service's distribution territory in
the Denver metropolitan area.
(b) As previously presented in evidence offered by Public Service in
support of its request in Docket No. 95A-169G for a CPCN for the 24-inch Fort
St. Vrain Pipeline, "Phase I" of the Front Range Pipeline project, the Front
Range Pipeline is necessary to provide supply transportation alternatives and to
access additional gas supply sources. The total overall pipeline project was to
encompass a 24-inch pipeline originating from the Chalk Bluffs Station, to the
north, and terminating at an interconnection with Public Service's distribution
system, to the south, at the Tri-Town valve set located between Fort Lupton and
Frederick. The first phase of the project, the Fort St. Vrain Pipeline extending
from the Tri-Town valve set to the Fort St. Vrain valve set, was approved by the
Commission in Decision No. C95-636. In granting the CPCN to Public Service in
that proceeding, the Commission addressed the second phase of the project,
finding that "the future extension of the pipeline north to the Chalk Bluffs Hub
will allow the Company to directly access several interstate pipelines and the
gas supply sources connected to those pipelines to serve its natural gas
customers along the Front Range." Referencing the overall pipeline project, the
Commission further found that "the pipeline will allow Public Service to access
natural gas supplies from new sources. This increased diversity of gas supplies
will likely benefit both electric and gas customers."
(c) The population and economy of the Front Range of Colorado,
including the various cities and towns therein, are growing at a rapid pace.
Consequently, the peak day demand and annual consumption of natural gas on
Public Service's system has been increasing at a steady rate. Market forecasts
indicate that the growth along the Front Range will continue to increase into
the foreseeable future.
(d) The present distribution facilities of Public Service are
limited in their ability to serve Public Service's growing market along the
Front Range and in their ability to
-12-
<PAGE>
receive natural gas from interstate pipelines other than CIG. The construction
of the Front Range Pipeline will enable Public Service to expand its delivery
capacity and provide additional supply access to the Chalk Bluffs Hub, which is
a major confluence of several interstate pipelines near Rockport, Colorado. This
will provide both Public Service and its customers access to these other
pipelines and, therefore, to natural gas supplies in many production areas and
supply basins in the Rocky Mountain Region. This improved access should lead to
lower priced supplies becoming available to the Front Range market. The Front
Range Pipeline will be desirable and beneficial to Public Service's existing
customers in the near future, when Public Service and other Colorado utilities
commence implementation of their plan to unbundle natural gas rates and allow
residential and commercial customers the opportunity to choose among natural gas
suppliers. The Front Range Pipeline will provide enhanced access advantage to
Public Service's customers in the evolving unbundled and deregulated
environment.
(e) There are a considerable number of interstate pipelines standing
ready to provide access to upstream gas supplies to Public Service and its
customers at the Chalk Bluffs Hub. As stated above, CIG, WIC, Williams, KNI,
Trailblazer and WGI are interstate pipelines that currently have
interconnections at Chalk Bluffs. Public Service's ability to receive gas from
these pipelines is currently provided by a single 8-inch pipeline that has
capacity to transport very limited quantities of natural gas. The addition of
the 24-inch Front Range Pipeline will further develop Chalk Bluffs into a major
"market area" where buyers and sellers of natural gas meet and enter into
transactions, which should provide benefits to all Public Service customers. In
addition, Public Service's existing transportation customers have expressed
interest and/or made requests for the change of their existing receipt points on
Public Service's distribution system to Chalk Bluffs. As discussed above, Public
Service currently does not have available capacity to provide for such requested
changes in receipt points.
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<PAGE>
(f) The peak day capacity of the proposed Front Range Pipeline is
approximately 269,000 Dth per day. Because of the rapid growth in the Front
Range, Applicant anticipates that this initial capacity will be fully utilized
by shifting gas supply purchases of 75,000 Dth per day to Chalk Bluffs,
increased annual system peak day growth of 200,000 Dth per day in the next few
years and finally by transportation customers requesting shifts in their
transportation receipt points to Chalk Bluffs. This utilization is described in
more detail in Witness Haeger's testimony.
(g) Public Service has considered alternatives to the proposed Front
Range Pipeline to determine if equivalent capacity could be obtained in another
form. Based on this review, Public Service has determined that optimal benefits
are provided by building the Front Range Pipeline project and extending the
Public Service city-gate to the Chalk Bluffs Hub. One current alternative
reviewed was potential utilization of the proposed KN Wattenberg "Front Runner
Pipeline." Utilization of this alternative would provide additional capacity to
the Front Range Market, but would not provide commensurate benefits provided by
Public Service's Front Range Pipeline project. Disadvantages of the Front Runner
Pipeline option include higher costs based on its higher investment requirement
for virtually the same capacity, KN Wattenberg's existing rates, the problem of
rate stacking, restrictions on movement of the city gate, and increased
administrative burden in nomination and scheduling by the addition of an
intervening third party pipeline.
(h) The repowering of Fort St. Vrain has been determined to be
necessary for Public Service to meet the forecasted demand of its electric
customers. The second phase of the Front Range Pipeline project will continue to
enhance supply options for Fort St. Vrain to source both fuel and capacity
needed to generate electricity required by Public Service's electric customers.
(i) The completion of the second phase of the Front Range Pipeline
project will offer Public Service additional options for the provision of
natural gas sales and
-14-
<PAGE>
transportation service to the Front Range Market. The Front Range Pipeline
reinforces Public Service's delivery system that serves Fort St. Vrain and other
Public Service customers. The diversity of gas supplies that can be accessed
will increase the reliability of Public Service's distribution system while
allowing more competitive gas supply choices for Public Service and its
customers.
(j) The Front Range Pipeline project via an alliance with CIG will
prevent duplicative facilities and result in a facility that can meet current
and future needs. Public Service plans to use a combination of existing electric
transmission and pipeline rights-of-way in routing the pipeline between Chalk
Bluffs and Fort St. Vrain. To minimize customer impacts and costs, the
construction of one pipeline sufficient to serve the needs of Public Service and
its market is in the public interest from both an economic and environmental
standpoint.
12. Environmental Concerns and Compliance. Necessary permits have been
applied for and the required studies are either complete or are in the process
of being completed. The pipeline route has been selected with a view toward
minimizing environmental impacts. As indicated above, Public Service plans to
use a combination of existing electric transmission and pipeline rights-of-way
in routing the pipeline between Chalk Bluffs and Fort St. Vrain. In addition,
the construction schedule is being planned so as to prevent interference with
critical wildlife activities. The project is being designed and will be
constructed and operated so as to prevent any adverse environmental
consequences. In addition, natural gas supply provided by this project is a
clean burning energy source with adequate regional supply availability that will
promote both a cleaner environment and energy independence.
13. Qualifications of Public Service. Public Service has provided gas
service in the State of Colorado for over 120 years and is the largest gas
utility in the state. Public Service employs highly skilled and experienced
personnel to manage the construction and
-15-
<PAGE>
operations of its natural gas pipeline systems. Public Service is able,
financially and operationally, to construct and operate the Front Range
Pipeline.
14. Related Agreements. The following agreements will be executed by
Public Service and WYCO Development upon the completion of the construction of
the pipeline and the receipt of all necessary regulatory approvals:
(a) Front Range Pipeline Purchase and Sale Agreement. This agreement
will be entered into by and between Public Service and WYCO Development upon
completion of construction of the Front Range Pipeline by Public Service and the
receipt of all necessary regulatory approvals. The agreement provides for the
terms of the sale of the Front Range Pipeline from Public Service to WYCO
Development. This agreement is attached hereto as Exhibit D.
(b) Lease Agreement. This agreement, attached hereto as Exhibit E,
will be entered into by and between Public Service and WYCO Development at the
same time the purchase and sale agreement is executed and will provide for the
terms of the 30-year lease of Front Range Pipeline from WYCO development to
Public Service. The lease also sets forth the duties and obligations of each
party with respective to the operation and maintenance, accounting and lease
payments.
15. Place of Hearing. In the event a hearing is deemed necessary by the
Commission, Public Service requests that it be held in one of the Commission's
hearing rooms in Denver, Colorado. If there are no protests or interventions, or
if such protests or interventions are insubstantial, Public Service requests the
Commission decide this matter without a hearing.
16. Public Service understands that the mere filing of this Application
does not, by itself, constitute authority to operate, and that any sums expended
by Public Service prior to Commission authorization are at the risk of Public
Service.
-16-
<PAGE>
17. Upon the issuance of the authority sought herein, Applicant states
that it will operate the pipeline in accordance with all applicable Commission
Rules and Regulations.
WHEREFORE, Public Service Company of Colorado respectfully requests that
the Commission: (i) set this matter for expedited procedure pursuant to section
40-6-109(5), C.R.S. and, if the matter is to be heard, to hear the matter itself
and issue an order thereon by May 22, 1998; (ii) grant Public Service a
certificate of public convenience and necessity authorizing Public service to
construct and operate the Front Range Pipeline; (iii) approve the transfer of
the Front Range Pipeline by sale from Public Service to WYCO Development and the
transfer back to Public Service by lease from WYCO Development; (iv) enter its
order providing for the requested treatment of investment in the construction
work in progress account, including capitalized cost of money; (v) issue a
declaratory ruling that WYCO Development will not be a public utility by virtue
of its nominal ownership interest in the Front Range Pipeline; and (vi) enter
its further or different orders or authorizations as may be necessary or
desirable in connection herewith.
Dated at Denver, Colorado this 23rd day of December, 1997
Respectfully submitted,
By: __________________________
James D. Albright, #18685
Associate General Counsel
New Century Services, Inc.
1225 17th Street, Suite 600
Denver, CO 80202-5533
Telephone number: (303) 294-2753
ATTORNEY FOR
PUBLIC SERVICE COMPANY OF COLORADO
-17-
<PAGE>
Exhibit H
Exhibit H - Proposed Form of Federal Register Notice
New Century Energies, Inc., et al. (70-[____])
New Century Energies, Inc. ("NCE"), 1225 17th Street, Denver, Colorado
80202-5533, a registered holding company, its electric utility subsidiary,
Public Service Company of Colorado ("PSCo"), 1225 17th Street, Denver, Colorado
80202-5533, and its non-utility subsidiary, NC Enterprises, Inc.
("Enterprises"), 1225 17th Street, Denver, Colorado 80202-5533 (collectively,
the "Applicants"), have filed an application or declaration under sections 9(a),
10, 12(b) and 12(f) of the Act and rules 43, 45, and 54 under the Act.
The Applicants request approval for various transactions relating to
the sale and leaseback by PSCo of a newly constructed approximately 53-mile,
24-inch diameter, natural gas pipeline that is designed to transport natural gas
from a point of interconnection with PSCo's existing measurement and compression
facilities located just south of the Colorado-Wyoming border near Rockport,
Colorado, to an interconnection with PSCo's existing 24-inch diameter pipeline
near PSCo's Ft. Vrain generating station (the "Front Range Pipeline"). The
estimated cost of construction of the Front Range Pipeline is $25.1 million.
PSCo is seeking a certificate of public convenience and necessity from the
Colorado Public Utilities Commission ("CPUC") to construct the Front Range
Pipeline. Subject to receipt of the CPUC order, PSCo intends to commence
construction of the new pipeline with a view to completing construction and
placing the facility in service by November 1, 1998 in time for the 1998-99
winter heating season.
In addition to PSCo's construction of the Front Range Pipeline, Wyoming
Interstate Company ("WIC"), an interstate natural gas pipeline and certain of
its affiliated companies, have agreed to construct certain facilities, including
new compression facilities and later, market conditions permitting, an
approximately 100-mile, 16-inch diameter, pipeline (collectively, the "Powder
River Lateral Expansion") which will provide additional transportation capacity
from Wyoming producing basins into the Rockport, Colorado area. The Front Range
Pipeline and Powder River Lateral Expansion together will increase
transportation capacity into PSCo's natural gas service area and will provide
PSCo and its transportation customers with improved access to upstream suppliers
of natural gas in production areas and supply basins in the Rocky Mountain
Region.
In order to coordinate and jointly manage the development of the Front
Range Pipeline and Powder River Lateral Expansion projects, it is proposed that
Enterprises and CIG Gas Supply Company ("CIGGS"), an affiliate of WIC, will
organize and acquire the membership interest of WYCO Development LLC ("WYCO"), a
special purpose non-utility limited liability company to be formed by
Enterprises and CIG. Enterprises and CIG will each own 50% of the membership
interests of WYCO. WYCO proposes to purchase the Front Range Pipeline, upon
completion, from PSCo and the Powder River Lateral Expansion, upon completion,
from WIC and simultaneously enter into 30-year lease agreements with PSCo and
WIC pursuant to which
<PAGE>
the completed facilities would be leased back to PSCo and WIC, respectively. The
facilities would be purchased by WYCO for an amount equal to the total cost
incurred by PSCo and WIC, plus an allowance for funds used during construction.
Lease payments under the facility leases will be cost-of-service based,
and will be calculated annually using rates of return, depreciation and income
tax factors authorized by the CPUC (in the case of the PSCo lease) and the
Federal Energy Regulatory Commission (in the case of the WIC lease). Each lease
will be a net lease under which PSCo and WIC, as the case may be, will be solely
responsible for operations, maintenance, repair, taxes and other costs of the
leased facilities.
Initially, all of the funds required by WYCO to purchase the completed
facilities will be supplied by Enterprises and CIG, respectively. In the future,
it is contemplated that WYCO may seek to refinance a portion of the cost of the
facilities with the proceeds of borrowings. WYCO would report the issuance of
any such debt securities (and any guaranty thereof by Enterprises) pursuant to
rule 52(b) under the Act on Form U-6B-2.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEW
CENTURY ENERGIES, INC. CONSOLIDTED BALANCE SHEET AS OF DECEMBER 31, 1997 AND
CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
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<NAME> New Century Energies, Inc.
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<NAME> Public Service Company of Colorado
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